Construction Law United Arab Emirates 2026, Articles 224 & 829, Good‑faith, Hardship and Contractor Classification: Contract Drafting Checklist

Construction law in the United Arab Emirates entered a new era on 1 June 2026, when Federal Decree‑Law No. 25 of 2025, the UAE Civil Transactions Law (CTL), came into force and replaced the longstanding Civil Code. For construction stakeholders, two provisions demand immediate attention: Article 224, which codifies an express good‑faith duty across negotiation and performance, and Article 829, which introduces a statutory hardship regime that gives courts and tribunals power to adjust or terminate contracts struck by extraordinary, unforeseen events. At the same time, Dubai Law No. 7 of 2025 has imposed a new contractor classification and registration framework with a one‑year regularisation window, creating a parallel compliance burden for every contractor and developer operating in the emirate.

This article provides a practitioner‑led contract drafting checklist, sample clauses and a dispute‑avoidance playbook to help in‑house counsel, project directors, contractors and procurement teams navigate these changes.

Executive Summary and Recommended Actions

The following action items summarise the most urgent steps for parties to construction contracts governed by UAE law. Each item is explored in detail in the sections that follow.

• Audit every live construction contract. Identify agreements formed before 1 June 2026 and assess whether the CTL transitional provisions alter existing risk allocations, prioritise contracts with remaining durations exceeding twelve months.
• Insert or update hardship clauses. Article 829 provides a statutory default, but bespoke hardship clause drafting is essential to control triggers, notice timelines, evidence burdens and escalation mechanics. See the clause bank in the Annex below.
• Define good‑faith obligations expressly. Article 224 imposes a broad duty; contracts should specify cooperation and disclosure covenants, objective performance benchmarks and agreed remedies for breach.
• Verify Dubai contractor classification status. Contractors operating in Dubai must confirm their classification category and registration under Law No. 7 of 2025 before the regularisation deadline expires.
• Update defect‑notification and decennial liability provisions. The CTL reframes latent‑defect treatment, align notification periods, evidence‑gathering duties and insurance requirements with the new statutory language.
• Review performance securities and insurance. Ensure bonds, guarantees and professional indemnity policies reflect the revised statutory obligations, particularly around hardship events and contractor reclassification.
• Revise dispute‑resolution clauses. Align notice mechanics, interim‑relief pathways and DAAB/adjudication provisions with CTL requirements and the good‑faith duty in the UAE.

What Changed in 2026: The UAE Civil Transactions Law at a Glance

Federal Decree‑Law No. 25 of 2025 represents the most significant overhaul of civil obligations law in the UAE since the original Civil Transactions Law of 1985. Published in the Official Gazette in December 2025 and enforceable from 1 June 2026, the CTL repeals and replaces the previous Civil Code while preserving certain transitional protections for contracts already in force on the effective date.

Key Dates and Transitional Rules

For construction law in the United Arab Emirates, the CTL’s transitional provisions are critical: long‑term agreements, including EPC, design‑build and concession contracts, should be reviewed to determine which obligations are governed by the old Civil Code and which fall under the new CTL regime. Industry observers expect that courts will apply the new good‑faith and hardship provisions to future performance obligations under existing contracts, making retroactive contract audits essential.

Articles 224 and 829 Explained for Construction Contracts

Two provisions of the UAE Civil Transactions Law 2026 carry the most transformative weight for the construction sector. Article 224 establishes a good‑faith duty applicable to all stages of the contractual lifecycle, while Article 829 introduces a formal hardship mechanism that permits judicial or arbitral intervention when extraordinary events fundamentally alter the economics of a contract.

Article 224, The Good‑Faith Duty

Article 224 requires that parties exercise their contractual rights and perform their obligations in good faith. In practical terms, this imposes duties of honesty, cooperation and fair dealing during both negotiation and execution. For construction projects, the implications are significant: an employer who withholds site‑access information or a contractor who conceals known design deficiencies may now face statutory liability beyond any express contractual remedy. Parties should draft explicit cooperation covenants and disclosure obligations into their contracts to give shape to this otherwise open‑ended duty.

Article 829, The Hardship Doctrine

Article 829 provides that where extraordinary events of a general nature, unforeseen at the time of contracting, render performance excessively onerous (though not impossible), the court or tribunal may reduce the onerous obligation to a reasonable level or adjust the contract terms. The distinction from force majeure is crucial: hardship does not excuse performance entirely but permits rebalancing. For a contractor facing extreme material‑price escalation or supply‑chain disruption that falls short of impossibility, Article 829 of the CTL opens a formal route to price adjustment or renegotiation that the old Civil Code left largely to judicial discretion.

A sample hardship trigger clause for immediate use:

“If, after the date of this Contract, an event occurs that was not reasonably foreseeable at the date of execution and that renders the Contractor’s performance excessively onerous within the meaning of Article 829 of Federal Decree‑Law No. 25 of 2025, the affected Party shall give notice in accordance with Clause [X] and the Parties shall enter into good‑faith negotiations for a period of [30] days before either Party may refer the matter to [the DAAB / arbitration].”

Hardship Clause Checklist and Sample Redlines

A well‑drafted hardship clause UAE construction contracts should contain the following elements. Each sub‑section below includes guidance for employers, contractors and counsel on how to calibrate the provision to the risk profile of the project.

Trigger Definitions

The hardship trigger must be specific enough to prevent opportunistic claims but broad enough to capture genuine economic disruption. Define the triggering threshold, for example, a percentage increase in the cost of specified materials or labour exceeding a stated benchmark, and exclude events that fall within normal commercial risk or that the affected party could have mitigated through insurance or hedging.

Notice and Time Limits

Require the affected party to issue a formal hardship notice within a defined period (typically 14 to 28 days) after the triggering event becomes apparent. The notice should specify the nature of the event, the estimated financial impact and the evidence relied upon. Late notice should result in forfeiture of the right to claim relief unless the claiming party can demonstrate reasonable cause for delay.

Sample notice wording: “The Contractor hereby gives notice pursuant to Clause [X] that the [describe event] constitutes a Hardship Event. The estimated additional cost is AED [amount]. Supporting evidence is attached at Appendix [Y]. The Contractor requests commencement of the negotiation period under Clause [X.2].”

Evidence and Mitigation Obligations

Require the claiming party to provide contemporaneous documentary evidence, invoices, market indices, supply correspondence, and to demonstrate active mitigation steps. An employer‑favourable version might require independent verification; a contractor‑friendly version might permit self‑certification subject to audit rights.

Remedial Paths

The clause should set out a clear escalation ladder:

1. Renegotiation. Mandatory good‑faith negotiation for a fixed period (e.g. 30 days).
2. Expert determination or DAAB. If negotiation fails, referral to an independent expert or Dispute Avoidance/Adjudication Board.
3. Price adjustment. A formulaic adjustment mechanism linked to agreed indices or verified costs.
4. Termination. If the hardship is so severe that no reasonable adjustment is possible, either party may terminate on defined terms including payment for work completed.

Three contract drafting checklist variants are provided in the Annex: employer‑favourable (narrow trigger, short notice, audit rights), neutral (balanced thresholds and shared risk), and contractor‑friendly (broader trigger, longer negotiation period, self‑certification).

Good‑Faith Duty: Risk Allocation, Behavioural Covenants and Remedies

The good‑faith duty under Article 224 is not merely aspirational, it creates enforceable obligations and, where breached, may give rise to damages or other remedies at law. For construction contracts, the challenge lies in translating this duty into measurable, actionable provisions.

Obligations During Performance

Contracts should include express covenants requiring each party to cooperate in the timely exchange of design information, site‑access permits, approvals and payment certifications. Consider including positive obligations to disclose known risks, share safety data and coordinate with co‑contractors. These behavioural covenants give substance to the statutory good‑faith duty in the UAE and reduce the risk of subjective judicial interpretation.

Contractual Safe‑Harbours

Rather than attempting to exclude the good‑faith obligation entirely, an approach that early indications suggest UAE courts may resist, parties should define what constitutes good‑faith compliance in their specific context. For instance, a clause might provide that compliance with specified reporting schedules, response times and approval protocols constitutes satisfaction of the good‑faith duty for the purposes of the contract.

Sanctions and Remedial Drafting

Include a remedial clause that specifies the consequences of a good‑faith breach: for example, the right to withhold a specified percentage of the next interim payment, to call on a performance bond, or to refer the matter to the DAAB for expedited determination. A sample conduct clause is provided in the Annex below (Clause C).

Defects, Latent Defects and Decennial Liability, CTL Impact and Insurance Considerations

Construction law in the United Arab Emirates has long imposed a form of decennial (ten‑year) liability on contractors and consultants for structural defects in buildings. The CTL preserves and clarifies this regime, and Dubai Law No. 3 of 2026, the Quality and Safety of Buildings law, adds emirate‑level obligations concerning completion certificates and post‑handover defect management.

Decennial Liability Overview

Under the CTL, contractors and architects remain jointly liable for a period of ten years from handover for total or partial collapse of a building, or for defects that threaten its stability or fitness for purpose. The decennial liability period cannot be shortened by contract. This means that limitation‑of‑liability clauses commonly found in FIDIC‑adapted contracts must be reviewed against the mandatory statutory minimum.

Drafting Provisions to Allocate Latent‑Defect Risk

Contracts should distinguish between patent defects (discoverable on reasonable inspection at handover) and latent defects (hidden and only emerging later). For latent defects falling outside the decennial regime, include specific notification windows, evidence protocols and allocation of remediation costs. Consider requiring contractors to maintain professional indemnity insurance for the full decennial period and to provide step‑in rights for the employer if the insurer rescinds cover.

Evidence and Defect Notification Checklist

• Immediate preservation of evidence. Photograph, survey and record the defect within 48 hours of discovery.
• Formal notification. Issue written notice to the contractor and (where applicable) the consultant within the contractually specified period.
• Independent assessment. Commission an independent expert report on causation and estimated remediation cost.
• Insurance notification. Notify all relevant insurers within policy‑required timescales.
• Preserve rights. Confirm in writing that all rights, including decennial liability claims, are reserved.

Dubai Contractor Classification and Registration (Law No. 7 of 2025): Compliance Timeline and Contract Impacts

Dubai Law No. 7 of 2025 establishes a mandatory contractor classification system administered by a dedicated classification committee. The law, which took effect in early 2026, requires all contractors undertaking works in Dubai to be registered and classified according to their technical capability, financial standing and track record. Existing contractors have a one‑year regularisation window to bring their registrations into compliance.

What Classification Affects

• Contract scope. A contractor’s classification category determines the maximum value and complexity of projects it may undertake.
• Subcontracting. Subcontractors must hold appropriate classification in their own right; main contractors are liable for engaging unclassified subcontractors.
• Performance limits. Classification may impose caps on simultaneous project values, effectively limiting a contractor’s capacity to bid for new work.

Contractual Representations and Warranty Checklist

Insert the following provisions into every construction contract involving works in Dubai:

• Classification warranty. The contractor warrants that it holds a valid classification appropriate to the scope and value of the works at the date of execution and throughout performance.
• Ongoing compliance obligation. The contractor shall maintain its classification and promptly notify the employer of any reclassification, suspension or revocation.
• Termination trigger. Failure to maintain the required classification category constitutes a material breach entitling the employer to terminate and call on the performance bond.
• Subcontractor flow‑down. The contractor shall ensure that all subcontractors hold and maintain appropriate classifications as required by Dubai Municipality standards.

Claims Management and Dispute‑Avoidance Playbook Under CTL 2026

The CTL’s good‑faith and hardship provisions alter the claims landscape for construction disputes in the United Arab Emirates. Parties must align their internal claims‑management protocols with the new statutory framework.

Notice Mechanics Aligned to the CTL

Every contractual notice, whether for variations, delays, hardship events or defects, should specify the CTL article relied upon, describe the factual basis with reasonable particularity and attach contemporaneous evidence. The good‑faith duty under Article 224 implies that notices must be issued promptly and honestly; strategically delayed or exaggerated claims may themselves constitute a breach.

Interim Remedies

The CTL framework supports applications for interim relief, including injunctions to prevent irreversible harm and interim payment orders. In arbitration, parties should ensure their dispute‑resolution clause expressly preserves the right to seek interim measures from UAE courts, particularly given the enhanced judicial discretion under the hardship regime.

Claims Timeline, Recommended Workflow

Dispute Boards and Arbitration Tips

Industry observers expect DAABs to become more common in UAE construction contracts as a natural extension of the good‑faith and hardship regimes. A standing DAAB, appointed at project commencement, can issue binding‑with‑immediate‑effect decisions that help avoid the cost and delay of formal arbitration. Arbitration clauses should reference a recognised UAE‑seated institution and expressly preserve the DAAB process as a condition precedent.

Checklist: Contract Drafting and Negotiation Actions, The 12‑Point Checklist

The following contract drafting checklist is designed for in‑house counsel and procurement teams preparing or reviewing construction contracts after 1 June 2026.

1. Definitions. Update all defined terms to reference the CTL (Federal Decree‑Law No. 25 of 2025) and remove references to the repealed Civil Code.
2. Hardship clause. Insert a bespoke hardship provision with defined triggers, notice periods, evidence requirements and escalation paths.
3. Good‑faith covenant. Include express cooperation, disclosure and fair‑dealing obligations aligned with Article 224.
4. Notice provisions. Specify format, timing and content requirements for all contractual notices; align with CTL good‑faith standards.
5. Evidence and records. Require contemporaneous record‑keeping and document‑retention obligations for both parties.
6. Price adjustment mechanism. Link to verifiable market indices and define the process for interim and final price adjustments under hardship.
7. Termination provisions. Review all termination triggers for consistency with CTL; add classification‑related termination rights.
8. Insurance and performance securities. Confirm that policy durations, coverage types and bond terms reflect decennial liability obligations and hardship scenarios.
9. Warranties and representations. Insert contractor classification warranties and ongoing compliance obligations for Dubai works.
10. Performance security. Align bond call‑down triggers with good‑faith requirements to avoid claims of bad‑faith enforcement.
11. Contractor classification covenants. Require and verify classification under Dubai Law No. 7 of 2025; include subcontractor flow‑down.
12. Transitional clauses. For contracts straddling the CTL effective date, include express provisions governing which law applies to pre‑ and post‑1 June 2026 obligations.

Annex: Clause Bank, Ready‑to‑Copy Clauses

The following sample clauses are provided for reference and adaptation. Each should be reviewed by qualified construction law counsel before incorporation into a binding contract.

• Clause A, Hardship Trigger. “A ‘Hardship Event’ means any event or circumstance occurring after the date of this Contract which (a) was not reasonably foreseeable at the date of execution, (b) is beyond the reasonable control of the affected Party, and (c) renders the affected Party’s performance excessively onerous, being an increase in the cost of performance exceeding [15]% of the Contract Price as determined by reference to [specified index/methodology].”
• Clause B, Hardship Notice. “The affected Party shall give written notice of a Hardship Event within [21] days of becoming aware of the event, specifying: (i) the nature and date of the event, (ii) the estimated financial impact with supporting evidence, and (iii) the mitigation steps taken or proposed. Failure to give timely notice shall extinguish the right to claim relief unless the affected Party demonstrates reasonable cause for the delay.”
• Clause C, Good‑Faith Cooperation. “Each Party shall, in the performance of its obligations under this Contract, act in good faith in accordance with Article 224 of Federal Decree‑Law No. 25 of 2025. Without limiting the generality of the foregoing, each Party shall: (a) respond to requests for information within [5] Business Days; (b) disclose promptly any matter that may materially affect the other Party’s ability to perform; and (c) cooperate in the resolution of disputes through the procedures set out in Clause [X].”
• Clause D, Decennial Defects Allocation. “The Contractor acknowledges that its liability for structural defects under the applicable provisions of Federal Decree‑Law No. 25 of 2025 is not limited or reduced by this Contract. The Contractor shall maintain professional indemnity insurance with a minimum cover of AED [amount] for the full ten‑year period commencing on the date of issuance of the Completion Certificate.”
• Clause E, Contractor Classification Covenant. “The Contractor warrants that, at the date of this Contract and throughout its performance, it holds a valid classification issued pursuant to Dubai Law No. 7 of 2025 appropriate to the scope and value of the Works. The Contractor shall promptly notify the Employer of any change to, suspension of, or revocation of its classification. Failure to maintain the required classification shall constitute a material breach entitling the Employer to terminate this Contract.”
• Clause F, Price Adjustment Formula. “Where a Hardship Event is established in accordance with Clause [A] and the Parties fail to reach agreement within the negotiation period prescribed by Clause [X], the Contract Price shall be adjusted by applying the following formula: Adjusted Price = Original Price × (Current Index Value / Base Index Value), where the index used shall be [specify, e.g. the UAE Central Bank Construction Cost Index] as published on the date falling [30] days before the date of the Hardship Notice.”

Construction law in the United Arab Emirates has fundamentally shifted with the CTL’s entry into force and Dubai’s new contractor classification regime. The practical effect will be felt in every construction contract negotiation, variation assessment and claims process from this point forward. Stakeholders who act now, auditing existing contracts, inserting the clauses and protocols outlined in this article and verifying compliance status, will be best positioned to manage risk, maintain project momentum and avoid costly disputes.

Sources

1. United Arab Emirates Legislations, Federal Decree‑Law No. (25) of 2025 (Civil Transactions Law)
2. Federal Decree‑Law No. (25) of 2025, Official Downloadable Text
3. UAE Government, Where to Find UAE Federal Laws
4. Dubai Government, Law No. 7 of 2025 Regulating Contracting Activities in Dubai
5. Dubai Municipality, Consultants and Contractors Licensing Standards
6. Dubai Law No. (3) of 2026, Quality and Safety of Buildings