Author: Amala Elizabeth
Construction projects are inherently complex. Delays, defective workmanship, payment disputes and unforeseen events can quickly transform commercial disagreements into costly legal disputes. While carefully negotiated contracts remain the primary mechanism for allocating these risks, the statutory framework governing contracts for work plays an equally important role in determining the parties' rights and obligations.
Against this backdrop, Federal Decree-Law No. (25) of 2025 Promulgating the Civil Transactions Law of the United Arab Emirates (the "Civil Transactions Law") has modernised the framework for contracts for work or, as they are called in the UAE, Muqawala Contracts. The new provisions, contained in Articles 812 to 839, replace the previous regime under Articles 872 to 896 of Federal Law No. (5) of 1985, while preserving many of the UAE's well-established legal principles. Rather than fundamentally changing the law, the reforms clarify key obligations, strengthen risk allocation and provide greater certainty on issues that frequently arise during construction projects.
The revised framework begins by clarifying the essential features of a contract for work. Article 812 defines such a contract as an agreement under which one party undertakes to make a thing or perform work in return for remuneration from the other party. Articles 813 and 814 reinforce contractual certainty by identifying the key matters that should be agreed from the outset, including the scope of work, method of performance, completion period, remuneration and responsibility for supplying materials.
Although these principles reflect established commercial practice, their express inclusion within the Civil Transactions Law encourages parties to define their respective obligations clearly at the outset of a project, reducing the potential for disputes arising from incomplete or ambiguous contractual arrangements.
One of the most significant features of the revised framework is its emphasis on contractor performance and proactive risk management.
Where the contractor supplies the materials, Article 815 requires them to comply with the contractual specifications or, where none exist, prevailing custom, with the contractor remaining responsible for their quality. Conversely, Article 816 requires contractors to safeguard employer-supplied materials, use them appropriately and return any unused materials upon completion. If those materials become unsuitable due to the contractor's negligence, the contractor must reimburse their value and may also be liable for compensation.
A notable enhancement appears in Article 816(3), which introduces an express obligation requiring contractors to notify employers immediately upon discovering defects in employer-supplied materials or any circumstance that may impede proper execution of the works. By placing early notification on a statutory footing, the legislation encourages parties to identify and address risks before they develop into delays or disputes.
The revised law also strengthens employer protection. Under Articles 818 and 819, contractors must complete the works in accordance with the contract and within the agreed timeframe, while remaining liable for loss or damage resulting from defective workmanship or negligence. Where defects arise, employers are given a clearer statutory framework for requiring rectification and, where appropriate, rescinding the contract or appointing another contractor to complete or rectify the works.
The revised Civil Transactions Law largely preserves the UAE's well-established decennial or strict liability regime under Articles 821 to 824, reaffirming one of the construction sector's most significant statutory protections.
Contractors and supervising engineers remain jointly and severally liable for the total or partial collapse of a building or fixed structure, and for defects affecting its structural stability or safety, arising within ten years from delivery of the completed works. The legislation also provides greater clarity regarding the engineer's role by distinguishing between liability for design defects and liability arising from supervision of construction under Article 822.
The reforms also introduce an important clarification through Article 821(4), which expressly preserves a contractor's right of recourse against subcontractors. While contractors remain fully responsible to employers, they retain the ability to pursue subcontractors whose work contributed to the relevant defect. This reinforces the importance of carefully drafted subcontract agreements containing appropriate indemnity and risk-allocation provisions.
Articles 825 to 831 refine the statutory framework governing payment and remuneration, recognising that commercial certainty is fundamental to successful project delivery.
The legislation confirms the employer's obligation to take delivery of completed works and, unless otherwise agreed, to pay the agreed remuneration upon delivery. Article 827 also supports cash flow by requiring proportionate payment for completed portions of the works that have been inspected and accepted.
For contracts based on estimated quantities, Article 828 requires contractors to notify employers where execution will exceed the original estimate. Failure to do so may result in the loss of the right to recover additional costs. Where the increase becomes onerous, the employer may either terminate the contract upon payment for completed work or require the contractor to continue while paying the increased remuneration.
The framework also preserves the commercial certainty traditionally associated with lump-sum contracts. Under Article 829, contractors are generally not entitled to additional remuneration merely because labour or material costs increase. However, Article 829(3) introduces an important safeguard by empowering the courts to restore contractual equilibrium where exceptional general circumstances fundamentally disrupt the financial basis of the contract. Depending on the circumstances, the court may extend the completion period, adjust remuneration or rescind the contract.
The Civil Transactions Law recognises the widespread use of subcontracting while preserving the contractor's primary responsibility. Under Articles 832 and 833, contractors may subcontract all or part of the works unless prohibited by the contract or the nature of the work, but remain fully liable to the employer for the subcontractor's performance. The legislation also confirms that subcontractors generally have no direct right to claim payment from the employer unless those rights have been assigned.
The revised framework also consolidates the rules governing termination under Articles 834 to 839. Of particular importance is Article 836, which confirms the employer's right to withdraw from the contract before completion, provided the contractor is compensated for expenses incurred, work completed and the profit that could reasonably have been earned. Article 837 further clarifies the allocation of risk where force majeure affects performance, while Articles 838 and 839 address the consequences of the contractor's death or inability to complete the works.
The revised provisions governing contracts for work modernise the UAE's statutory framework without departing from its well-established legal principles. By strengthening contractor obligations, refining payment mechanisms, clarifying risk allocation and preserving key protections such as decennial liability, the Civil Transactions Law provides greater certainty for construction projects across the UAE.
For employers, contractors, engineers and developers, the reforms present an opportunity to review existing construction contracts and standard forms to ensure they reflect the updated legislative framework. Businesses that proactively align their contractual arrangements with the Civil Transactions Law will be better positioned to allocate risk effectively, minimise disputes and deliver projects with greater commercial and legal certainty.
Note: This Legal Update / Newsletter is intended for general informational purposes only and should not be construed as legal advice. It is based on laws and legal interpretations in effect as of the date of publication. Laws and regulations may change over time, and their application can vary depending on individual circumstances. Readers are strongly encouraged to seek specific legal counsel before acting on any of the information provided herein.
Construction projects are inherently complex. Delays, defective workmanship, payment disputes and unforeseen events can quickly transform commercial disagreements into costly legal disputes. While carefully negotiated contracts remain the primary mechanism for allocating these risks, the statutory framework governing contracts for work plays an equally important role in determining the parties' rights and obligations.
Against this backdrop, Federal Decree-Law No. (25) of 2025 Promulgating the Civil Transactions Law of the United Arab Emirates (the "Civil Transactions Law") has modernised the framework for contracts for work or, as they are called in the UAE, Muqawala Contracts. The new provisions, contained in Articles 812 to 839, replace the previous regime under Articles 872 to 896 of Federal Law No. (5) of 1985, while preserving many of the UAE's well-established legal principles. Rather than fundamentally changing the law, the reforms clarify key obligations, strengthen risk allocation and provide greater certainty on issues that frequently arise during construction projects.
Building a stronger contractual foundation
The revised framework begins by clarifying the essential features of a contract for work. Article 812 defines such a contract as an agreement under which one party undertakes to make a thing or perform work in return for remuneration from the other party. Articles 813 and 814 reinforce contractual certainty by identifying the key matters that should be agreed from the outset, including the scope of work, method of performance, completion period, remuneration and responsibility for supplying materials.Although these principles reflect established commercial practice, their express inclusion within the Civil Transactions Law encourages parties to define their respective obligations clearly at the outset of a project, reducing the potential for disputes arising from incomplete or ambiguous contractual arrangements.
Raising the standard for project delivery
One of the most significant features of the revised framework is its emphasis on contractor performance and proactive risk management.Where the contractor supplies the materials, Article 815 requires them to comply with the contractual specifications or, where none exist, prevailing custom, with the contractor remaining responsible for their quality. Conversely, Article 816 requires contractors to safeguard employer-supplied materials, use them appropriately and return any unused materials upon completion. If those materials become unsuitable due to the contractor's negligence, the contractor must reimburse their value and may also be liable for compensation.
A notable enhancement appears in Article 816(3), which introduces an express obligation requiring contractors to notify employers immediately upon discovering defects in employer-supplied materials or any circumstance that may impede proper execution of the works. By placing early notification on a statutory footing, the legislation encourages parties to identify and address risks before they develop into delays or disputes.
The revised law also strengthens employer protection. Under Articles 818 and 819, contractors must complete the works in accordance with the contract and within the agreed timeframe, while remaining liable for loss or damage resulting from defective workmanship or negligence. Where defects arise, employers are given a clearer statutory framework for requiring rectification and, where appropriate, rescinding the contract or appointing another contractor to complete or rectify the works.
Managing construction risk
The revised Civil Transactions Law largely preserves the UAE's well-established decennial or strict liability regime under Articles 821 to 824, reaffirming one of the construction sector's most significant statutory protections.Contractors and supervising engineers remain jointly and severally liable for the total or partial collapse of a building or fixed structure, and for defects affecting its structural stability or safety, arising within ten years from delivery of the completed works. The legislation also provides greater clarity regarding the engineer's role by distinguishing between liability for design defects and liability arising from supervision of construction under Article 822.
The reforms also introduce an important clarification through Article 821(4), which expressly preserves a contractor's right of recourse against subcontractors. While contractors remain fully responsible to employers, they retain the ability to pursue subcontractors whose work contributed to the relevant defect. This reinforces the importance of carefully drafted subcontract agreements containing appropriate indemnity and risk-allocation provisions.
Payment and pricing: Greater commercial certainty
Articles 825 to 831 refine the statutory framework governing payment and remuneration, recognising that commercial certainty is fundamental to successful project delivery.The legislation confirms the employer's obligation to take delivery of completed works and, unless otherwise agreed, to pay the agreed remuneration upon delivery. Article 827 also supports cash flow by requiring proportionate payment for completed portions of the works that have been inspected and accepted.
For contracts based on estimated quantities, Article 828 requires contractors to notify employers where execution will exceed the original estimate. Failure to do so may result in the loss of the right to recover additional costs. Where the increase becomes onerous, the employer may either terminate the contract upon payment for completed work or require the contractor to continue while paying the increased remuneration.
The framework also preserves the commercial certainty traditionally associated with lump-sum contracts. Under Article 829, contractors are generally not entitled to additional remuneration merely because labour or material costs increase. However, Article 829(3) introduces an important safeguard by empowering the courts to restore contractual equilibrium where exceptional general circumstances fundamentally disrupt the financial basis of the contract. Depending on the circumstances, the court may extend the completion period, adjust remuneration or rescind the contract.
Subcontracting and project completion
The Civil Transactions Law recognises the widespread use of subcontracting while preserving the contractor's primary responsibility. Under Articles 832 and 833, contractors may subcontract all or part of the works unless prohibited by the contract or the nature of the work, but remain fully liable to the employer for the subcontractor's performance. The legislation also confirms that subcontractors generally have no direct right to claim payment from the employer unless those rights have been assigned.The revised framework also consolidates the rules governing termination under Articles 834 to 839. Of particular importance is Article 836, which confirms the employer's right to withdraw from the contract before completion, provided the contractor is compensated for expenses incurred, work completed and the profit that could reasonably have been earned. Article 837 further clarifies the allocation of risk where force majeure affects performance, while Articles 838 and 839 address the consequences of the contractor's death or inability to complete the works.
Conclusion
The revised provisions governing contracts for work modernise the UAE's statutory framework without departing from its well-established legal principles. By strengthening contractor obligations, refining payment mechanisms, clarifying risk allocation and preserving key protections such as decennial liability, the Civil Transactions Law provides greater certainty for construction projects across the UAE.For employers, contractors, engineers and developers, the reforms present an opportunity to review existing construction contracts and standard forms to ensure they reflect the updated legislative framework. Businesses that proactively align their contractual arrangements with the Civil Transactions Law will be better positioned to allocate risk effectively, minimise disputes and deliver projects with greater commercial and legal certainty.
Note: This Legal Update / Newsletter is intended for general informational purposes only and should not be construed as legal advice. It is based on laws and legal interpretations in effect as of the date of publication. Laws and regulations may change over time, and their application can vary depending on individual circumstances. Readers are strongly encouraged to seek specific legal counsel before acting on any of the information provided herein.