UAE Civil Transactions Law Amendments: Contracts, Capacity And Application Of Sharia Principles — A Comprehensive Overview.

On the road to modernizing the civil law frameworks, the UAE issued a Federal Decree-Law on Civil Transactions, amending the previous Federal Law No. 5 of 1985. The paramount significance was for the simplification and abolishment of duplication in the laws. The Civil Transactions Law amendments revolve around provisions pertaining to sales, proprietary rights, capacity, majority, and integration of judicial discretion in coherence with the application of Sharia Laws. The amendment also deals with blood money (diya), and additionally, the court can award damages for financial or emotional compensation, if it deems fit.

Sale Contracts

Laws governing the sale contracts now includes regulations pertaining to sale by sample and model, thereby protecting against gross inadequacy, enhanced reforms for latent defects and the right to reduce price, reject or replacement. The period of limitation has been extended from 6 months to 1 year from delivery in latent defects, except where a longer guarantee has been agreed. The amendment also emphasizes, in regard to the sale of conflicted rights, forbidding acquisition by attorneys, court officials, prosecutors and judges involved in the conflict to promote the integrity of the judiciary. Additionally, if no legislative provisions exist, the judges shall refer to the Sharia laws and provide for the best remedy to achieve justice and protect the public interest.

Proprietary rights

The amendments introduce significant reforms to the regulation of proprietary rights. Usufructuary and construction rights must now be registered with the competent authority, ensuring legal certainty, enforceability, and transparency between parties. The law further clarifies the responsibilities of the holder of rights and allows the parties to determine the duration of such rights within a defined framework.

Unclaimed Foreigners’ assets

The unclaimed financial assets belonging to foreigners who leave no heirs in the UAE shall be designated as a charitable endowment (waqf), under the supervision of the competent authority for effective allocation and management. Additionally, the new amendment also includes provisions pertaining to assignment, offering protection to possession via preventive actions that aim at preventing encroachment before damages.

Amending the age of majority

At the heart of the reforms lies the reduction of the age of majority from 21 Hijiri (lunar) years to 18 Gregorian (solar) years, makes this consistent with other domestic legislations such as labour and juvenile laws. Simultaneously, the law also reduced the age for minors who seek judicial authorization to manage their assets from 18 Hijri (lunar) years to 15 Gregorian (solar) years. This was done to promote entrepreneurship, especially among the youth, with a clear and reasonable framework.

Sharia application, judicial discretion, and assistance

Sharia rules and principles may be applied, on the absence of law or special legislation even in matters regarding missing persons, parentage, and absentees. Persons who need help due to an incapacity to express their need, can now get assistance from the court, which would act in their best interest.

Pre-Contractual negotiations

The parties have an obligation to disclose significant information to ensure conscious and well-informed contractual decision-making. It also establishes a framework agreement to manage the recurring or long contractual relationships, predefining essential terms, reducing cost and time. In terms of contractual capacity, a discerning minor’s financial actions that involve both benefit and harm are considered voidable in the minor’s interest rather than suspended, giving the guardian the right to request annulment within a year of becoming aware of the situation and enabling the minor to do so within a year of becoming an adult.

Blood Money

The amendment allows the court to award other financial or emotional damages which it deems fit in addition to the blood money.

Non-profit companies

Corporate laws were also revamped to balance the scales of commercial transactions with civil transaction laws.  The law authorizes one-person businesses, controls partner withdrawal, company continuance, and dissolution procedures, and improves corporate stability. It also makes a distinction between civil and commercial firms based on activity and legal form. The introduction of a specific legal framework for nonprofit organizations mandates that earnings be reinvested in the organization’s goals. Additionally, the law introduces independent regulation of “mudaraba contracts” outside the purview of company law, establishes a contemporary framework for professional firms, and controls ownership, nomenclature, and liability.

Insurance

Insurance provisions were refined, including a comprehensive framework for takaful insurance. Rules governing guarantees were reorganized to protect guarantors and ensure equitable enforcement.

Conclusion

Hence, the issuance of these amendments helped in resculpting the legal framework by unifying and simplifying the provisions and eliminating the overlaps with specialised laws, bringing greater clarity and efficiency in day-to-day transactions. The provisions pertain to pre-contractual disclosures and agreements strengths predictability, supporting individuals and entrepreneurs to engage in long terms relations without any disputes. The reduction in the age of majority and simultaneously allowing young minds to engage in economic activity empowers the younger residents of the UAE to be active. By allowing judicial flexibility in the absence of statutes, judges can draw inferences from Sharia principles to promote justice. Its application to sensitive matters, such as parentage and absentees, with new laws regarding usufruct rights. These amendments show the dynamic nature of laws, assuring the UAE remains as a shining lamp for legal excellence.