Part of our series on the new UAE Civil Transactions Law (Federal Decree-Law No. 25 of 2025), in force since 1 June 2026.
The theory of abuse of rights already existed under the 1985 Civil Code. But the new Civil Transactions Law, in its article 106, substantially recasts its analytical framework.
From intent to harm, to a balancing of interests
Until now, abuse essentially required establishing an intention to cause harm. Now, the exercise of a contractual right may be judged abusive where the benefit sought by its holder is manifestly disproportionate to the harm caused to the other party. The analysis becomes objective: a balancing of interests, no longer merely a trial of intent.
Considerable implications
A termination right exercised in conditions that ruin the counterparty for a marginal advantage may be challenged. The mechanical application of disproportionate contractual penalties or liquidated damages may be neutralised. More broadly, any contractual prerogative exercised without regard for its impact on the other party is now exposed to enhanced judicial review.
For contract drafters, two lessons. First, the harshest clause is no longer necessarily the most effective: an excessive prerogative risks failing the proportionality test. Second, it becomes prudent to justify the exercise of sensitive contractual rights, documenting the legitimate interest pursued.
This is work Prosilame handles: drafting penalty clauses that survive the proportionality test.
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This article is general information and does not constitute legal advice. Each situation calls for its own analysis.