Civil Liability & Property Damage Claims Under the UAE Civil Transactions Law

Introduction

Federal Decree-Law No. 25 of 2025 introduced a new Civil Transactions Law in the UAE and came fully into force on 1 June 2026. It replaced Federal Law No. 5 of 1985 and updated many of the rules dealing with contracts, civil liability, construction work, property damage and compensation.

For businesses, developers, insurers, contractors and individuals, these changes are important when dealing with accidents, damaged property, defective work and negligence claims.

Foundational Principles Under Articles 246 and 247

Article 246 sets out a basic rule of civil liability. If a person’s act causes harm to another person, they may be required to compensate the injured person for that harm.

Article 247 explains the difference between direct and indirect harm.

Direct harm happens when an act immediately causes the damage. In such cases, compensation may be required without the injured party having to prove intentional wrongdoing.

Indirect harm is different. This happens when a person’s conduct creates circumstances that later result in damage. In these situations, liability generally requires proof of wrongdoing, negligence or improper conduct.

Causation, External Causes and Contributory Negligence

In a civil liability claim, the claimant generally needs to show that harm was caused and that the loss being claimed resulted from the act in question.

Article 248 provides that if a person destroys another person’s property, the affected person cannot retaliate by destroying the other person’s property. If they do, each person will be responsible for the property they destroyed.

Where more than one person is responsible for causing harm, Article 253 provides that each person may be liable according to their share of responsibility. The court may also hold them liable in equal shares or jointly and severally.

Article 253 also allows the court to reduce the amount of compensation, or award no compensation at all, if the injured person contributed to causing the harm or made the damage worse through their own actions.

Property Damage and Accident Claims

Property damage claims can arise from many situations, including fires, road accidents, machinery failures, building defects and other incidents causing physical damage.

Responsibility will depend on how the accident occurred, who controlled the property or equipment involved, and whether another event contributed to the loss.

Responsibility for Property and Assets

The Civil Transactions Law contains rules dealing with persons who have control over buildings, machinery, property and other assets that may cause harm.

For example, where damage results from a building collapse or an incident involving property under someone’s control, the person responsible for that property may have to prove that the loss resulted from an external cause rather than their own acts or omissions.

Similar principles can apply where one person holds property belonging to another.

Under Article 906, property held under a deposit agreement is treated as property held in trust. If that property is damaged or destroyed because of a cause attributable to the person holding it, that person may be responsible for the resulting loss.

Time Limits for Claims Under Article 258

Time limits are important when bringing a compensation claim arising from a harmful act.

Under Article 258, a compensation claim generally will not be heard after three years from the date the injured person became aware of both the harm and the person responsible for it.

Where the compensation claim arises from a crime and the criminal case is still ongoing after the three-year period, the time limit for bringing the compensation claim will not begin until the criminal case has concluded.

In all cases, a compensation claim will not be heard after fifteen years from the date the harmful act occurred. For this reason, it is important to act promptly and preserve relevant evidence, such as photographs, expert reports, police records, invoices and correspondence.

Defective Contractor Work and Construction Disputes

Construction contracts in the UAE are commonly treated as muqawala contracts, where a contractor agrees to carry out work or produce something in return for payment.

Federal Decree-Law No. 25 of 2025 reorganised the legal provisions governing these contracts. The main provisions now appear in Articles 812 to 839.

Contractor Standards and Notice Requirements

Contractors are expected to carry out their work according to proper professional standards.

Where no specific completion date has been agreed, the work must generally be completed within a reasonable period according to Article 818.

If the employer provides the materials, the contractor must properly inspect them and inform the employer if they discover defects or problems that could affect the work. Article 816(3) also places an important notice requirement on contractors. If a contractor becomes aware of something that could delay or interfere with the work, the contractor must inform the employer promptly. Failure to provide the required notice may leave the contractor responsible for the legal and financial consequences of that event.

This is particularly relevant in disputes involving project delays and claims for additional time or payment.

Liability for Serious Building Defects

Article 822 explains the responsibility of engineers in construction projects based on the work they were appointed to perform.

If an engineer is responsible only for designing the building or structure, the engineer may be liable for defects caused by the design or construction plans they prepared, but not for defects resulting from the way the work was carried out.

If the engineer is appointed only to supervise the construction work, the engineer may be jointly liable with the contractor for defects in the work carried out under their supervision.

This means that an engineer’s liability will depend on whether their role involved design, supervision, or both.

Agreed Compensation Under Article 340

Commercial and construction contracts often contain clauses fixing an amount of compensation that must be paid if there is a delay or breach.

Article 340 allows the UAE courts to review such agreed compensation. The court may reduce the amount where the debtor proves that it is excessive, that the other party contributed to the loss, or that part of the contractual obligation was already performed.

On the other hand, Article 340(4) allows a creditor to seek more than the agreed amount where fraud or gross fault can be established.

Compensation for Financial Loss Under Article 255

Article 255 deals with the assessment of compensation arising from harmful acts.

Compensation may include both the actual loss suffered and profits that were reasonably expected but were lost because of the wrongful act.

However, a claim for lost profit must be supported by evidence. The claimant must show that the expected profit was reasonably likely and not merely a possibility.

Business records, accounts, invoices, audit reports and other financial documents can therefore become important when proving a negligence claim in the UAE.

Good Faith During Contract Negotiations

The new Civil Transactions Law also deals more clearly with conduct before a contract is signed.

Article 121 requires parties to act in good faith when starting, conducting and ending contractual negotiations. A party that ends negotiations improperly or in bad faith may, depending on the circumstances, be responsible for losses suffered by the other party as a result.

Article 122 deals with important information that should be disclosed during negotiations. Where one party holds information that is important to the other party’s decision to enter the contract, disclosure may be required in the circumstances set out under the law.

These provisions make transparency during negotiations increasingly important.

Evidence and Court-Appointed Experts

Evidence plays an important role in UAE civil disputes, particularly where the case involves technical questions.

Courts may appoint engineering, accounting or other technical experts to examine damaged property, inspect construction works, review project documents and calculate financial losses.

For this reason, parties should maintain proper records from the beginning of a project or dispute. Useful evidence may include contracts, invoices, photographs, site reports, notices, emails, technical reports, inspection certificates and financial records.

Parties should also participate properly in expert proceedings and provide the documents needed to support their position.

Conclusion

Federal Decree-Law No. 25 of 2025 provides an updated framework for dealing with civil liability, property damage, construction defects and compensation claims in the UAE. The law places importance on identifying who caused the harm, the extent of the loss, the responsibilities of the parties involved and the evidence available to support a claim.

For individuals, businesses, contractors and property owners, acting promptly and keeping clear records can make a significant difference when a dispute arises. Understanding the relevant legal duties, time limits and compensation rules can also help parties protect their rights and manage potential claims more effectively.