Good faith in the United Arab Emirates
From 1 June 2026 the country operates three good-faith regimes in parallel. The new Civil Code introduces a structured pre-contractual regime and a disclosure duty that cannot be drafted around.
The Civil Code is the backbone of almost every transaction between companies and individuals in this country. Federal Decree-Law No. 25 of 2025, which repeals Federal Law No. 5 of 1985 on entry into force, is therefore a significant change — and the structured pre-contractual regime in Articles 121 to 123 has rightly attracted practitioners' attention.
To assess what those articles change, it helps to understand what good faith already meant here. No single answer is possible: onshore UAE law is civil, the DIFC operates a hybrid system heavily influenced by English common law, and the ADGM applies English common law directly. Each treats good faith differently.
Three regimes, three positions
Onshore, Article 246 of the 1985 Code required contracts to be performed in a manner consistent with the requirements of good faith, binding parties not only to express terms but to the contract's requirements as derived from law, custom and the nature of the transaction. It spoke to performance. It did not, by its terms, regulate negotiation. For the negotiation phase, the 1985 Code offered two indirect routes: the deceit framework, bounded by its requirement of fraudulent intent; and the act-causing-harm framework, requiring the claimant to construct fault, harm and causation from first principles.
The DIFC Contract Law contains textually broad implied obligations of good faith and fair dealing and a duty of cooperation, drawn from the UNIDROIT tradition rather than from English law. The DIFC Courts have read them narrowly: they govern the mode of performance and the implication of terms, and they do not displace clear express terms or permit the court to rewrite a bargain.
The ADGM applies English common law directly, which means no general duty of good faith in negotiation or performance, subject to the narrow relational-contract exception. A party negotiating an ADGM-law contract may walk away at any time, for any reason, subject only to misrepresentation and to whatever lock-out, exclusivity or break-fee provisions the parties agreed.
What the 2025 Code introduces
Articles 121 to 123 create a structured pre-contractual regime with no direct equivalent in the 1985 Code, modelled on the French reform of 2016 and going further. Four things are genuinely new.
First, an express statutory cause of action for bad-faith negotiation, with its own threshold, its own measure of damages — limited to the negative interest, excluding expected profits from the contract that was not concluded — and its own evidentiary architecture.
Second, and most consequentially, a non-waivable duty of pre-contractual disclosure. A party aware of information of decisive importance to the other party's consent must disclose it. The parties may not agree to limit, waive or exclude that obligation; any clause to the contrary is null and void; and the aggrieved party may seek annulment of the contract for breach. This cannot be drafted around.
Third, a statutory allocation of the burden of proof that turns the negotiation file, the data room and the disclosure schedule into evidentially decisive documents. The party alleging concealment must establish that information was withheld; the party alleged to have concealed must prove that disclosure was made.
Fourth, annulment as a remedy distinct from fraud-based annulment — and it does not require proof of fraudulent intent.
What this means for you
Drafting. Entire-agreement and non-reliance clauses remain useful for allocating reliance and defining contractual representations. They will not exclude the disclosure duty in onshore UAE-law contracts. Templates for sale and purchase agreements, joint venture agreements, distribution agreements, real estate transactions and financing documents are worth reviewing on that basis. Term sheets should make the binding and non-binding architecture explicit and address exclusivity and negotiation costs.
Evidence. Indexed data rooms with download logs, dated disclosure schedules, signed question-and-answer logs and structured information-request workflows stop being good housekeeping and become evidentially decisive. The party who can show what was disclosed, when, to whom and in what form holds a clear procedural advantage. The party who cannot, does not.
Forum. Choice of law was always substantive. It is now more so. A party wanting maximum freedom to walk away from negotiations, or to rely on heavily negotiated non-reliance language, has a stronger reason than before to choose DIFC or English law. A party valuing statutory disclosure protection has a stronger reason to choose onshore UAE law.