Drafting Contracts and Agreements in the UAE

Drafting contracts and agreements in the UAE is the cheapest legal protection you can buy, and the most expensive mistake you can make if you neglect it. A contract is the private law between its parties, and when a dispute arises the court starts with it before anything else: what was written, in which language, and what it left unsaid. Many disputes that drag on for years could have been settled by a single line written at the right time.

The recurring problem is not the absence of a contract but a contract copied from an online template, translated word for word, or signed in a hurry without reading the clauses that decide what happens on delay, termination or disagreement. Those clauses are precisely the ones whose value appears on the day of the dispute.

This guide explains what a contract in the UAE must contain and the main types of contract and what distinguishes each, in practical language, and for each issue points you to a detailed article in the Contract and Agreement Drafting section, so you read the overview here and the detail there.

Why is an oral agreement not enough?

An oral agreement is binding in many cases, but it is hard to prove, and each party remembers it in the way that suits him. Correspondence and transfers may save the situation, but they prove that a dealing existed more than they prove its terms. A written contract settles what was agreed and narrows the dispute from “what did we agree?” to “who breached it?”.

The language of the contract is a practical matter, not a formality: the local courts work in Arabic, a contract in a foreign language needs a certified translation in a dispute, and a single term translated differently can change the meaning. A bilingual contract with an express clause stating which text prevails is therefore preferable.

The essential clauses every contract must contain

Whatever the type of contract, some clauses are indispensable: a precise identification of the parties, their capacities and the authority of whoever signs for them; the subject matter described beyond interpretation; the price, how and when it is paid; the term and renewal conditions; the grounds for termination and their effects; what happens on delay or breach; the governing law; and how disputes are resolved. The absence of any of them leaves a gap filled by the general law, which may not be in your favour.

Penalty clauses, interest and compensation

A penalty clause fixes in advance the compensation for breach, relieving the creditor of proving the loss and its amount. But the judge may adjust it if it is excessive or trivial compared with the actual loss, so it must be proportionate and justified. The same applies to interest for late payment in commercial transactions, which has its own limits; stating it clearly avoids a long dispute.

Sale, supply and import contracts

In supply contracts, disputes concentrate on the time and place of delivery, the specifications of the goods and how they are inspected, who bears the risk in transit, when ownership passes, and what happens if the goods arrive defective. International contracts add the questions of recognised delivery terms, currency, governing law and how to enforce against a party outside the country.

Brokerage, commission and non-circumvention agreements

Whoever introduces two parties without a written agreement risks being bypassed once they meet and losing his commission. That is why brokerage, non-circumvention and non-disclosure agreements are signed before the parties’ identities or the deal’s details are revealed, defining precisely what counts as a commissionable deal, the amount, and how long the protection lasts after the relationship ends.

Partnership contracts and shareholders’ agreements

The memorandum of association covers the minimum, and the shareholders’ agreement is what governs the issues that cause disputes: division of powers, decisions requiring unanimity, a partner’s exit and the valuation of his share, the right of first refusal, what happens to shares on death, and a partner who fails to contribute what he committed. Writing it at the start is far easier than negotiating it after a dispute.

Construction and contracting agreements

Construction contracts are among the most complex because of their length and the number of parties: the owner, the contractor, the consultant and the subcontractors. Their key clauses are the payment schedule linked to progress, variation orders and how they are priced, extensions of time and delay compensation, guarantees and performance bonds, the maintenance period, and liability for defects after handover. Many large projects use well-known international forms, but these need to be adapted to UAE law before signing.

Lease contracts

A lease looks standard because the authorities provide its form, but the additional clauses are what decide disputes: maintenance and who bears it, subletting, renewal and rent increases, vacating before the end of the term, and cheques handed over as security. Reading these clauses before signing matters more than reading the rent.

Employment contracts and non-compete clauses

The employment contract sets the salary, benefits, term, probation period and termination conditions, and it is the first reference on dismissal or resignation. A non-compete clause is valid if it is limited in time, place and type of work to what is needed to protect a legitimate interest of the employer; an unlimited clause is open to being set aside.

Security: cheques, guarantees and powers of attorney

Many contracts are backed by a security cheque, a personal guarantee or a power of attorney. The common mistake is handing over a cheque without a document showing it is for security and which obligation it secures, signing it blank, or granting a general power of attorney wider than the transaction needs. Correct drafting defines the scope of the security, its duration and when it may be used.

Arbitration clauses, governing law and the competent court

The dispute resolution clause is usually written at the end of the contract with the least attention, yet it decides the fate of any disagreement: whether it goes before the state courts, the DIFC Courts or arbitration, under which law, and where. A vague arbitration clause, or one that conflicts with the jurisdiction clause, can open a side dispute over jurisdiction lasting months before the substance is reached.

Reviewing a contract before signing and when a dispute arises

A lawyer’s review before signing reveals clauses slanted towards the other party, undefined obligations, and gaps in termination and compensation. When a dispute arises, the first review of the contract determines the route: a payment order if the debt is established by the contract, a lawsuit, arbitration if there is a clause, or negotiation from a position of strength.

Contract drafting in Dubai

The general rules on contracts are federal and apply across all seven emirates, but some contracts in Dubai have registration or notarisation requirements with specific authorities, such as leases, real estate transactions and certain powers of attorney, and some are affected by the choice between the Dubai Courts and the DIFC Courts. Knowing these requirements at the drafting stage avoids a rejected transaction or a contract that is weak when enforced.

What to prepare before asking for a contract to be drafted or reviewed

How to verify a lawyer’s licence before appointing him

Before dealing with anyone to draft or review your contract, check that it is a licensed law firm or legal consultancy. The Legal Affairs Department of the Government of Dubai maintains an electronic directory of licensed lawyers, legal consultants and firms that can be used to check a name and a firm. The professions of advocacy and legal consultancy in the UAE are regulated by Federal Decree-Law No. 34 of 2022 and its executive regulations.

Legal references

Frequently asked questions on contract drafting in the UAE

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