A well-drafted contract is the foundation of every commercial relationship. In the UAE, contracts are governed primarily by Federal Law No. 5 of 1985 (the Civil Transactions Law) and Federal Law No. 18 of 1993 (the Commercial Transactions Law). Many UAE businesses use informal, poorly drafted, or template agreements that fail to adequately protect their interests. Understanding what every UAE business contract should include — and what mistakes to avoid — is essential for any commercial operation.
Essential Elements of a UAE Business Contract
Every UAE commercial contract should clearly specify: the identities of all parties including their UAE trade licence details, the precise scope of work or goods to be supplied, pricing, payment terms and currency, delivery timelines and milestones, intellectual property ownership, confidentiality obligations, liability limitations and indemnities, termination rights and notice periods, and force majeure provisions. Contracts should be written in both Arabic and the relevant language of the foreign party, with the Arabic version prevailing in the event of conflict.
Governing Law and Dispute Resolution
Contracts between UAE parties are governed by UAE law by default. For contracts with international parties, the choice of governing law is typically negotiated. The UAE courts apply UAE civil law principles with limited regard for foreign precedents. Parties who prefer a common law framework can choose DIFC or ADGM courts as the dispute resolution forum, even for transactions with no DIFC or ADGM nexus — these courts apply English common law and their judgments are enforceable in the UAE and in many international jurisdictions.
Arbitration as an Alternative to Litigation
International arbitration is widely used for high-value UAE commercial disputes. The Dubai International Arbitration Centre (DIAC) and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) are the main UAE arbitration institutions. Including an arbitration clause specifying the seat, language, and rules of arbitration provides a more predictable and private dispute resolution mechanism than UAE court litigation. The UAE is a signatory to the New York Convention, making UAE arbitration awards enforceable in over 170 countries.
Common UAE Contract Drafting Mistakes
Frequent mistakes include: using templates drafted for other jurisdictions without adapting for UAE law, omitting the Arabic language requirement for certain contract types, failing to specify the payment currency (leaving it open to exchange rate disputes), using vague scope-of-work descriptions that make delivery disputes inevitable, and not including a clear termination process with notice periods. Gulf Oasis Business Management works with specialist UAE commercial lawyers to review and strengthen client contracts.