Warranties and Indemnities in UAE M&A (2026): Drafting, Enforcement & Limiting Liability

Warranties and indemnities UAE deal teams rely on have entered a new phase of scrutiny following the entry into force of the reformed federal civil code that shapes the 2026 transactional landscape. For in-house counsel, private equity teams, buyers and sellers structuring UAE acquisitions, the practical questions are the same they have always been, how to draft contractual protection that holds up, how to cap and time-limit exposure, and how to enforce a claim if the deal sours, but the answers now sit against a modernised statutory backdrop and a court and arbitration environment that interprets contractual freedom against mandatory public-order limits.

This guide translates that framework into clause-level drafting guidance, negotiation notes and an enforcement route map tailored to UAE practice. It is written for practitioners who need to move from high-level commentary to defensible contract language.

How the UAE Civil Transactions Law treats warranties and indemnities UAE deal teams draft

The starting point for any analysis of warranties and indemnities UAE lawyers prepare is Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law, which came into force on 1 June 2026 and repealed Federal Law No. 5 of 1985. The new law governs civil obligations, contracts and remedies within its scope, subject to applicable special legislation and conflict-of-laws rules. It generally applies prospectively, while separate transitional provisions apply to limitation periods that had not expired when the new law took effect. The date of the relevant agreement and claim should therefore be checked before determining which statutory regime applies.

Unlike English law, where a schedule of representations and warranties is a familiar and freely enforceable construct, UAE courts approach these instruments through the lens of the code, asking whether the obligation is lawful, sufficiently certain, and consistent with good faith.

Statutory text, relevant articles and immediate implications

The Civil Transactions Law recognises the binding force of contracts and requires them to be performed in accordance with their terms and in a manner consistent with good faith. Under onshore UAE law, warranties and indemnities are not recognised as separate legal concepts in the same way as under English law; their effect depends on the contractual obligations and remedies created by the agreement. Drafting should therefore identify clearly the obligation, the circumstances constituting breach, the loss or payment obligation that follows and any agreed limitations or remedies.

The drafting should specify the trigger for liability, the loss or payment covered, the applicable notice procedure and the relationship between the relevant protection and any limitation-of-liability regime. Parties should not assume that describing a provision as an “indemnity” automatically removes questions of causation, proof of loss or the application of mandatory UAE rules. Where the agreement predetermines compensation for breach, Article 340 of the Civil Transactions Law must also be considered.

Interaction with mandatory public order rules and consumer protections

Contractual limitations must be considered against the mandatory provisions applicable to the particular type of liability. Article 340 governs agreed compensation and permits the court to reduce it in specified circumstances, while allowing recovery above the agreed amount where fraud or gross fault is proved; any agreement contrary to Article 340 is void. Article 257 separately provides that a term exempting or reducing liability arising from a harmful act is void. These rules should be distinguished from negotiated limitations applying solely to contractual liability, which require separate analysis under the applicable law.

For cross-border contracts, Article 19 of the Civil Transactions Law expressly recognises the parties’ ability to choose the law governing their contractual obligations. That choice remains subject to the UAE conflict-of-laws framework, including Article 29, under which a provision of foreign law will not be applied if it conflicts with UAE public order or public morals. The effect of mandatory UAE rules should therefore be assessed by reference to the governing law, the nature of the claim and the forum rather than assuming that every UAE rule automatically overrides the parties’ chosen law.

Practical takeaway for drafters

The practical takeaway is that warranties and indemnities UAE contracts contain must be drafted with precision, certainty and internal consistency. Define the state of affairs being warranted, quantify or make ascertainable the loss being indemnified, and never assume that a broad exclusion will survive contact with mandatory rules. Where the parties want the predictability of English-style drafting, they should combine it with a considered choice of seat and governing law, including the option of the common-law jurisdictions of the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM), and an enforcement strategy that anticipates onshore recognition.

Drafting warranties in UAE M&A, practical clause bank and negotiation notes

Warranties are statements of fact about the target given as at signing and, usually, repeated at completion. In warranties UAE M&A practice, the buyer’s aim is a comprehensive schedule that allocates risk of unknown liabilities to the seller; the seller’s aim is to narrow scope, qualify by knowledge and disclosure, and time-limit exposure. Getting the mechanics right early avoids the common failure mode where a broadly drafted schedule collapses in enforcement because it is uncertain or inconsistent with the disclosure regime.

Core warranty clause, sample wording and annotation

Sample only, adapt to deal specifics and take local law advice.

“The Seller warrants to the Buyer that each of the statements set out in Schedule [X] (the Warranties) is true, accurate and not misleading as at the date of this Agreement and, save where expressly stated to be given only at a particular date, will be true, accurate and not misleading as at Completion by reference to the facts and circumstances then existing.”

Annotation: The clause fixes the testing dates for the warranties and ties repetition to completion. From the buyer’s perspective, “not misleading” broadens the standard beyond mere literal accuracy. From the seller’s perspective, the negotiation points are whether the warranties repeat at completion at all, and whether repetition is qualified by reference to any post-signing disclosure. A key drafting discipline under the Civil Transactions Law is to ensure each individual warranty in the schedule is specific and certain, because a court assessing breach will look at the precise statement said to be untrue and the loss it caused.

Survival periods and sunset clauses, sample wording

Sample only, adapt to deal specifics.

“No claim under the Warranties shall be brought unless written notice of such claim (specifying in reasonable detail the matter giving rise to it and, so far as reasonably practicable, the Buyer’s good-faith estimate of the amount claimed) is given to the Seller on or before the date falling [24] months after Completion, save that claims under the Tax Warranties and Fundamental Warranties shall be subject to the separate periods specified in this Agreement, in each case subject to any mandatory limitation period under applicable law.”

Annotation: A contractual survival period or claims-notification deadline should be distinguished from the statutory period within which proceedings may be brought. The applicable statutory period depends on the nature of the claim and transaction. In particular, Article 92 of Federal Decree-Law No. 50 of 2022 Promulgating the Commercial Transactions Law generally provides a five-year period for claims concerning commercial obligations between merchants, unless a shorter period applies by law. Other claims may be subject to different periods. Articles 6 and 7 of the new Civil Transactions Law also contain transitional rules for limitation periods that had not expired on 1 June 2026.

Knowledge and materiality qualifiers, drafting traps and solutions

Knowledge and materiality qualifiers are heavily negotiated and, in the UAE, interpreted strictly. A warranty given “so far as the Seller is aware” is only as useful as the definition of awareness. The trap is leaving “aware” undefined; the solution is to specify whose knowledge counts, whether it includes constructive or deemed knowledge, and what enquiry the relevant individuals are deemed to have made.

• Define the knowledge group. Name the individuals or roles whose awareness is relevant, rather than referring generically to “the Seller”.
• Specify the enquiry standard. State whether awareness means actual knowledge or knowledge after reasonable enquiry, because UAE courts will read the phrase as written.
• Handle materiality carefully. A materiality qualifier (“in all material respects”) should be tied to a clear threshold or defined by reference to a monetary figure to avoid uncertainty that undermines enforceability.

Disclosure letter design and schedule management

The effect of disclosure depends on the SPA and the agreed disclosure regime. Where the warranties are expressly qualified by fair disclosure, a matter that satisfies the contractual disclosure standard may prevent or limit a warranty claim. The agreement should therefore define what constitutes fair disclosure and specify whether general disclosures, specific disclosures and data-room materials qualify the warranties, and on what basis.

Sample disclosure letter excerpt, sample only, adapt to deal specifics.

“The Warranties are qualified by, and the Buyer shall not be entitled to claim in respect of, any matter fairly disclosed in this letter or in the Disclosure Bundle. Disclosure of any matter under a specific Warranty shall be treated as disclosure against all other Warranties to which it is relevant. In this letter, a matter is ‘fairly disclosed’ if it is disclosed in sufficient detail to enable a reasonable buyer to identify the nature and scope of the matter disclosed.”

Drafting indemnities in UAE M&A, scope, triggers and carve-outs

In M&A drafting, warranties and indemnities are commonly used for different commercial purposes: warranties generally address statements about the target, while specific indemnities allocate identified risks. Under onshore UAE law, however, those labels do not by themselves create the distinct remedial consequences familiar from English law. A specific indemnity should therefore define the relevant risk, payment trigger, recoverable amounts and any applicable exclusions or limitations expressly rather than relying on the label alone.

Express indemnities versus warranty claims, pros and cons

• Certainty of recovery. A specific indemnity for a known liability avoids arguments about whether the warranty was breached; the trigger is the occurrence of the identified event.
• Loss measurement. Indemnities can be drafted so recovery is on a full-loss basis, whereas warranty claims are measured by reference to compensation principles under the code.
• Negotiation friction. Sellers resist specific indemnities because they read as an admission that the risk exists; this is why indemnities tend to be reserved for issues surfaced in due diligence.
• Certainty of drafting. Because the Civil Transactions Law requires the obligation and the loss to be ascertainable, an open-ended indemnity is more vulnerable than a targeted one.

Tailored indemnity wording, tax, fraud and third-party claims

Sample only, adapt to deal specifics and take local law advice.

Tax indemnity: “The Seller shall indemnify the Buyer against any Tax liability of the Company arising in respect of any period ending on or before Completion, together with any reasonable costs properly incurred in connection with such liability, save to the extent provided for in the Completion Accounts.”

Fraud indemnity: “The Seller shall indemnify the Buyer on demand against all losses, liabilities and costs arising out of or in connection with any fraud, wilful misconduct or fraudulent misrepresentation by the Seller or its officers in connection with this Agreement, and no limitation on liability in this Agreement shall apply to any such claim.”

Third-party claim indemnity: “The Seller shall indemnify the Buyer against any liability to a third party arising from [the identified matter], subject to the Buyer giving the Seller conduct rights in respect of the defence and settlement of such claim in accordance with Clause [X].”

Annotation: The fraud provision is drafted to disapply the contractual liability caps. Under Article 340, a creditor may recover more than agreed compensation where fraud or gross fault is proved, and an agreement contrary to the statutory rules in that Article is void. Article 257 separately prevents contractual exemption or reduction of liability arising from a harmful act. The SPA should therefore distinguish clearly between contractual claims, agreed compensation and any non-contractual liability when setting the scope of its caps and carve-outs.

Escrow and holdback mechanisms to secure indemnities

Buyers may secure identified post-closing exposure through an escrow account or completion holdback. A portion of the consideration can be retained and released in accordance with agreed claim and release mechanics. Escrow may be particularly useful in cross-border transactions where the seller intends to distribute sale proceeds or where enforcement against the seller would otherwise have to be pursued in another jurisdiction. The escrow amount, release dates, treatment of pending claims, interest and dispute mechanism should be aligned with the underlying SPA protections.

Limiting liability, caps, baskets and limitation periods under UAE law

Limiting liability is where seller protection and mandatory-rule risk collide. The market expects caps, baskets and time limits, but each must be drafted so it survives both interpretation and the public-order limits discussed above.

Caps and baskets, drafting templates and negotiation positions

Sample only, adapt to deal specifics.

“The Seller’s aggregate liability in respect of all claims under the Warranties shall not exceed [an amount equal to the consideration], and no liability shall arise unless (a) the amount of an individual claim exceeds [de minimis figure] and (b) the aggregate of all claims exceeding that figure exceeds [threshold], in which case the Seller shall be liable for the whole amount and not merely the excess.”

Key negotiation points:

• Aggregate cap. General warranties are commonly subject to an agreed cap, while title, capacity and other fundamental warranties may be subject to a higher cap or separate treatment.
  Basket type. The wording above is a “tipping basket” where the whole amount is recoverable once the threshold is crossed; a “deductible basket” only allows recovery of the excess. Specify which applies to avoid dispute.
  De minimis. Small claims may be excluded from the claims regime through an agreed de minimis threshold.
  Carve-outs. The treatment of fraud, gross fault, wilful misconduct, title and capacity should be stated expressly and checked against mandatory UAE rules. Article 340 applies mandatory controls to agreed compensation, while Article 257 separately prohibits exclusion or mitigation of liability arising from a harmful act.

Limitation periods, statutory versus contractual periods, tolling and notice triggers

Contractual survival periods and statutory limitation periods are separate issues. An SPA may require a buyer to notify a warranty claim within an agreed period and may also require proceedings to be commenced within a further period after notice. The applicable statutory time bar depends on the nature of the claim. For commercial obligations between merchants, Article 92 of the Commercial Transactions Law generally provides a five-year period from the date the obligation falls due, unless a shorter statutory period applies. General civil claims and other categories of claim may be subject to different periods. The accrual date should therefore be determined from the particular obligation and alleged breach rather than assumed to be Completion in every case.

For agreements or claims spanning 1 June 2026, Articles 6 and 7 of Federal Decree-Law No. 25 of 2025 should also be checked because they contain transitional rules for limitation periods that had already begun but had not expired when the new law entered into force.

Remedies hierarchy and liquidated damages versus indemnities

Set out whether damages, indemnity recovery and any specific remedies are cumulative or exclusive. Article 340 permits parties to agree compensation in advance but limits judicial adjustment to specified circumstances. The court may reduce the agreed amount where the debtor proves that it is excessive or that the obligation has been partially performed, and may reduce or refuse compensation where the creditor contributed to the damage. Compensation above the agreed amount may be claimed where fraud or gross fault is proved. Any agreement contrary to Article 340 is void.

English law versus UAE Civil Transactions Law: a comparison

Enforceability of indemnities UAE claimants pursue, courts, arbitration and cross-border execution

A protective clause is only worth the strategy behind its enforcement. Deal teams should decide the dispute-resolution route at the drafting stage, because the choice between onshore litigation and arbitration shapes both the speed and the reach of any recovery.

Enforcing indemnities and warranty claims in UAE courts

Where the parties have submitted disputes to the onshore UAE courts, proceedings are brought before the competent federal or local court. The applicable substantive law must be determined separately: Article 19 of the Civil Transactions Law permits parties to choose the law governing their contractual obligations, subject to the UAE conflict-of-laws rules and the public-order limitation in Article 29. Where UAE law applies, the Civil Transactions Law, Commercial Transactions Law and any relevant special legislation must be considered together. A claimant should also comply with contractual notice requirements, preserve documentary evidence of breach and loss and consider any interim measures available under the applicable procedural rules.

Defendants, in turn, should test whether notice was validly and timeously given, since a defective or late notice can bar an otherwise good claim.

Arbitration, drafting enforcement-friendly clauses

Arbitration is commonly used for cross-border M&A disputes and UAE-seated arbitrations are governed by Federal Law No. 6 of 2018 on Arbitration, as amended. The arbitration clause should specify the seat, institutional rules, number of arbitrators and language, while the governing law of the SPA should be stated separately. DIAC and the Abu Dhabi International Arbitration Centre (arbitrateAD) both provide institutional arbitration frameworks, including emergency-arbitrator procedures under their respective rules. Parties should also consider the availability of court-ordered interim measures and the jurisdictions in which any eventual award may need to be enforced.

Cross-border enforcement and recognition of foreign judgments and awards

Where a seller’s assets sit outside the UAE, or a foreign judgment or award must be executed onshore, recognition proceedings are the gateway to execution. Arbitral awards generally travel more easily across borders than court judgments, which is a further reason to prefer arbitration in cross-border structures. Claimants should localise their strategy early, identifying where enforceable assets sit and confirming the recognition route through the relevant UAE court before committing to a forum.

W&I insurance UAE deal teams should consider and how disclosure regimes interact with local law

W&I insurance can transfer specified transaction risk to an insurer, most commonly by covering losses arising from unknown breaches of insured warranties and, depending on the policy, certain tax protections. A buyer-side policy can reduce the buyer’s reliance on direct recourse against the seller and can support a seller’s clean-exit objectives. W&I insurance is now an established feature of sophisticated private M&A involving UAE and wider GCC targets, particularly in private-equity exits and competitive sale processes.

Designing disclosure letters to satisfy insurers

Insurers underwrite on the back of the buyer’s due diligence and the disclosure regime, so the disclosure letter must be robust and consistent with the warranty schedule. Underwriters expect a fair-disclosure standard, a well-organised data room and evidence that material risks were investigated. A disclosure regime that is vague or internally inconsistent will attract exclusions or a higher premium. Aligning the disclosure letter, the diligence reports and the warranty schedule is therefore both a legal and an insurance discipline.

Typical W&I carve-outs and underwriter requirements in the UAE market

Policies commonly exclude known matters and may exclude or restrict cover for specified tax, sanctions, forward-looking or other transaction-specific risks. The treatment of fraud depends on the policy structure; under buyer-side policies, insurers commonly preserve rights of recourse against the seller in cases of seller fraud rather than treating fraud simply as a universal policy exclusion. Current Middle East underwriting also places particular emphasis on sanctions and other identified cross-border exposures. The SPA and policy should therefore be reviewed together so that excluded or known risks are addressed through price, a specific indemnity, escrow or another agreed mechanism.

Cost/benefit, buyer versus seller perspectives

For sellers, W&I supports a clean break and reduces escrow and holdback demands; for buyers, it provides a solvent, ring-fenced source of recovery. The premium is weighed against deal size, the seller’s covenant strength and the residual risk left uncovered by the policy’s carve-outs.

Conclusion and recommended next steps for warranties and indemnities UAE deal teams

Getting warranties and indemnities UAE agreements right in 2026 means drafting with certainty, respecting mandatory public-order limits, and choosing an enforcement route before the ink dries. Deal teams should review and amend core warranty and indemnity wording, agree survival, cap and basket mechanics early, obtain a W&I term sheet where the risk profile justifies it, plan the enforcement forum and notice timelines, and instruct local counsel to confirm the statutory interplay under the Civil Transactions Law. Doing so converts contractual protection on paper into recoverable value in practice.

Sources

1. UAE Government, Federal laws portal (u.ae)
2. UAE Ministry of Justice
3. Dubai Courts
4. Abu Dhabi Judicial Department