Kadernani & CompanyA commercial contract can appear entirely workable until performance begins.
The price may be clear, yet the acceptance mechanism prevents the supplier from invoicing. A liability cap may appear reasonable until it is compared with the losses that could actually arise. The agreement may provide a right to terminate, but say little about what happens to data, work in progress, prepaid amounts or transition support after termination. A familiar governing-law clause may sit beside a dispute-resolution provision that is incomplete, contradictory or difficult to enforce.
This is why commercial contract review in the UAE should rarely be treated as a line-by-line drafting exercise.
The real question is whether the agreement accurately reflects the commercial bargain, allocates the material risks deliberately and gives the business workable remedies if the transaction does not proceed as expected.
That analysis has become particularly important following the introduction of Federal Decree-Law No. 25 of 2025 promulgating the UAE Civil Transactions Law, which took effect on 1 June 2026. Businesses should also consider the legal seat of the contracting parties, applicable sector regulation and whether the transaction sits within mainland UAE, a conventional free zone, the Dubai International Financial Centre, the Abu Dhabi Global Market or a cross-border structure.
Contract Review Is a Commercial Control Function
Commercial agreements allocate considerably more than legal responsibility.
They determine who carries the cost of delay, defective performance, scope changes, regulatory approvals, price movements, customer dependencies, supply disruption, insolvency and early termination.
They also determine what evidence will exist if one party later needs to establish a breach, recover payment, defend a claim or terminate the relationship.
A serious contract review therefore starts with the transaction rather than the precedent agreement.
What is the business actually buying, selling, financing, licensing or delivering?
Where is the economic value?
What would cause the transaction to fail?
Which risks can reasonably be insured, priced or absorbed, and which risks need to be contractually transferred?
A limitation-of-liability clause illustrates the point. A cap equal to the annual contract value may be commercially acceptable in one transaction and seriously inadequate in another. Its significance depends on the potential loss, available insurance, criticality of the services, data exposure, downstream liabilities and whether claims could arise long after performance has ended.
The objective is not to eliminate every risk. Commercial transactions require parties to assume risk.
The objective is to ensure that significant risks are understood and consciously allocated rather than discovered after the relationship has deteriorated.
The 2026 UAE Civil Transactions Framework Matters to Contract Review
For contracts governed by applicable UAE federal civil law, the legislative environment changed materially on 1 June 2026 when the new Civil Transactions Law came into force.
The reform does more than renumber older contractual principles. Among other developments, the new framework addresses pre-contractual negotiations and disclosure of fundamental information, introduces express treatment of framework agreements and modernises aspects of contractual and works-related obligations.
For businesses, this makes the period before signature increasingly relevant.
Contract risk does not necessarily begin only when a final agreement is executed. What information was disclosed, what representations were made during negotiations, how the parties documented their commercial understanding and whether the eventual agreement accurately captures that understanding may all become significant if the transaction later breaks down.
This reinforces an important contracting discipline: material commercial assumptions should not remain solely in emails, presentations or negotiation calls when they are intended to form part of the bargain.
Scope, Deliverables and Acceptance
Many disputes presented as non-payment cases are actually scope disputes.
The supplier says the contracted work has been completed. The customer says the deliverable does not satisfy the agreed requirements. Each side then relies on different emails, meeting notes or assumptions to explain what the contract was supposed to mean.
A properly structured agreement should therefore define, where relevant:
- the goods or services to be supplied;
- specifications and technical standards;
- milestones and completion dates;
- dependencies on each party;
- testing procedures;
- acceptance criteria;
- responsibility for regulatory or third-party approvals; and
- the consequences of delayed or rejected acceptance.
Acceptance mechanisms deserve particular attention because they frequently control when payment becomes due.
A contract that permits acceptance to be delayed indefinitely, or gives one party an entirely subjective right to reject deliverables, may substantially change the economic bargain even if the payment clause itself appears favourable.
Variation and Change Control
Commercial relationships evolve.
Construction projects change. Technology implementations encounter new specifications. Consultancy mandates expand. Supply volumes move. Regulatory requirements change.
The agreement should anticipate this.
A workable change-control mechanism should establish who can request or approve a variation, what information must accompany it, how price and programme consequences are determined and whether work can proceed before the change is formally documented.
Without this discipline, parties often discover after the work has been performed that they disagree about whether it was included in the original price.
The legal problem then becomes evidential as much as contractual.
Payment, Security and Cash-Flow Protection
A strong payment provision does more than state an amount and due date.
Depending on the transaction, it should address invoicing conditions, milestones, retention, VAT treatment, disputed amounts, set-off, currency, bank charges, late payment and rights following continued non-payment.
The commercial question is equally important:
What happens if the other party becomes unable or unwilling to pay?
For significant exposures, an unsecured contractual promise may not provide sufficient protection.
Depending on the deal, the parties may consider bank guarantees, parent-company guarantees, letters of credit, escrow arrangements, advance-payment protection, retention mechanisms or staged payments linked to objectively measurable performance.
The appropriate protection will depend on which side of the transaction is taking the greater credit or performance risk.
A supplier committing substantial resources may require stronger payment security. A customer paying before delivery may require performance security.
The contract should reflect that economic reality.
Liability Caps, Exclusions and Indemnities
Liability clauses are often among the most heavily negotiated provisions in a commercial contract because they determine how much of the downside each party ultimately carries.
They should be analysed as a complete system.
A review should consider:
- the general liability cap;
- any separate sub-caps;
- excluded categories of loss;
- contractual indemnities;
- liabilities excluded from the cap;
- insurance requirements; and
- the relationship between contractual remedies and the underlying transaction.
It is rarely sufficient to ask whether a liability cap is “market standard.”
The more useful question is whether the cap is proportionate to the actual risk being transferred.
A contract worth AED 500,000 can theoretically expose a business to losses substantially exceeding AED 500,000 if the supplier controls critical data, systems, intellectual property, customer relationships or operational infrastructure.
Indemnities require similar scrutiny.
The agreement should make clear what triggers the indemnity, which losses are covered, whether third-party claims are included, who controls the defence, whether settlement requires consent and what notification requirements apply.
An indemnity that appears to be one paragraph of standard drafting can materially alter the economics of the transaction.
Insurance Must Match the Contractual Exposure
Insurance requirements should not be treated as evidence that the contractual risk has been solved.
The policy must actually respond to the relevant exposure.
A contractual indemnity may extend considerably beyond the insured events. A liability cap may exceed available policy limits. Certain cyber, professional, regulatory or contractual liabilities may be excluded.
Where insurance is intended to support the contractual risk allocation, the policy structure and contract should be assessed together.
Termination Is Only Half of the Exit Analysis
A right to terminate has limited commercial value if the agreement does not explain what happens immediately afterwards.
Termination provisions should address the circumstances in which the relationship may end, which may include material breach, repeated underperformance, insolvency, regulatory restrictions, prolonged force majeure or, where commercially agreed, termination for convenience.
But the exit consequences are equally important.
What happens to:
- unfinished work;
- prepaid fees;
- outstanding invoices;
- customer data;
- confidential information;
- intellectual property;
- physical assets;
- licences;
- subcontractors;
- transition support; and
- accrued claims?
A business dependent on a critical technology or service provider may need meaningful transition assistance.
A supplier that incurs substantial up-front mobilisation costs may require compensation if the customer has a broad termination-for-convenience right.
The drafting should reflect the commercial dependency, not merely confirm that either party can terminate.
Intellectual Property and the Value Being Created
Ownership language should reflect what the parties actually expect to own at the end of the transaction.
This is particularly important in software development, consultancy, design, professional services, branding, research and other knowledge-based engagements.
A customer may reasonably expect ownership of bespoke deliverables. The provider may need to retain its pre-existing tools, templates, software, methodologies or know-how.
The contract should distinguish between background intellectual property and project-specific work and then regulate licences, modifications, derivative works and permitted future use.
Where this distinction is unclear, the parties may complete the commercial project only to discover that they disagree about who owns one of its most valuable outputs.
Data, Confidential Information and Technology Risk
Contracts involving personal data, commercially sensitive information or cloud-based systems should reflect how information actually moves between the parties.
Relevant issues may include access rights, security standards, permitted processing, subcontractors, international transfers, incident response, retention and deletion.
Contract provisions should align with applicable UAE or financial-free-zone data protection regimes where relevant.
They should also match operational reality.
A contractual prohibition on overseas processing provides little practical protection if the service architecture necessarily relies on international cloud infrastructure. Conversely, unrestricted rights to access or disclose information may be unacceptable for regulated businesses or companies handling valuable proprietary data.
Corporate Authority and Signing Risk
Even a well-negotiated contract may encounter enforcement problems if the person signing it does not have sufficient authority.
The review should therefore consider the identity and legal status of the contracting entity as well as the authority of its signatory.
Depending on the company and transaction, relevant documents may include constitutional documents, board or shareholder resolutions, powers of attorney and authorised-signatory records.
The UAE Commercial Companies Law was itself amended through Federal Decree-Law No. 20 of 2025, reinforcing the importance of considering the current corporate framework rather than relying on older assumptions about governance and company structures.
For significant transactions, signing authority should be verified before execution rather than investigated after a dispute arises.
Governing Law and Jurisdiction Are Different Questions
One of the most common weaknesses in cross-border agreements is the assumption that governing law and dispute forum are effectively the same issue.
They are not.
The governing-law clause identifies the law intended to govern the contractual relationship, subject to applicable legal rules.
The jurisdiction or arbitration clause identifies where and through what process disputes will be determined.
These provisions need to work together.
A UAE transaction may involve mainland UAE courts, DIFC Courts, ADGM Courts or arbitration under rules such as DIAC, ICC or SIAC, depending on the parties, transaction and agreed mechanism.
DIFC and ADGM are also distinct legal jurisdictions with their own legal frameworks. They should not be treated simply as alternative UAE court venues.
For sophisticated transactions, the dispute clause should therefore be selected deliberately rather than copied from an unrelated precedent.
What Should an Arbitration Clause Address?
Where arbitration is selected, the agreement should generally address the arbitral institution or rules, seat, tribunal composition, language and scope of disputes covered.
The seat is particularly significant because it connects the arbitration to a procedural legal framework and supervisory court.
Poorly drafted arbitration clauses can lead to substantial cost being incurred on jurisdictional arguments before the substantive dispute has even been heard.
Businesses should also consider where the counterparty's assets are located.
Winning a case and recovering money are not necessarily the same exercise.
Enforcement strategy can influence the choice of dispute mechanism at the contract-drafting stage.
When Should a Commercial Contract Be Reviewed?
The most useful review usually takes place before the parties become commercially committed to positions that are difficult to renegotiate.
Early involvement allows legal counsel to identify structural issues at term-sheet or negotiation stage rather than attempting to repair them after the commercial teams have effectively agreed the transaction.
That does not mean every routine purchase order requires extensive legal negotiation.
The level of review should be proportionate to the exposure.
Factors may include:
- contract value;
- duration;
- strategic importance;
- dependency on the counterparty;
- regulatory risk;
- exclusivity;
- intellectual property;
- data exposure;
- cross-border enforcement;
- concentration risk; and
- consequences if the transaction fails.
A ten-page agreement may carry substantially greater risk than a 100-page agreement if those ten pages grant exclusivity, transfer valuable IP or create a major long-term financial commitment.
A Practical Commercial Contract Review Before Signing
Before approving a significant agreement, senior management should be able to answer the following questions.
Do we know exactly what each party must deliver?
If scope and acceptance cannot be objectively measured, performance disputes become considerably easier to create and harder to resolve.
Can payment be withheld, delayed or set off in circumstances we have not priced?
The payment clause should be read together with acceptance, retention, set-off and dispute provisions.
What is the maximum realistic financial exposure?
This requires reviewing liability caps, exclusions, indemnities and insurance collectively.
Can we exit if the relationship stops working?
Termination rights matter, but so do the operational and financial consequences of exit.
Who owns the intellectual property and data when the relationship ends?
Ambiguity here can undermine the value of the entire transaction.
Does the person signing for each party have authority?
Authority should be established before signature.
If a dispute arises, where will it actually be heard?
The answer should be clear from the agreement, not something the parties need to litigate before reaching the substantive dispute.
If we win, can we realistically enforce against the counterparty or its assets?
Enforcement should be considered when the dispute clause is drafted, not only after judgment or award.
A useful contract review ultimately converts these questions into negotiating decisions.
The Strongest Contract Is One That Still Works When the Relationship Does Not
Commercial agreements are often negotiated when both parties expect the relationship to succeed.
Good drafting assumes that it might not.
The real test of a contract is therefore not whether it reads comfortably on the signing date. It is whether the agreement remains clear when payment is late, performance is disputed, costs rise, a key person leaves, a regulator intervenes, one party wants to exit or the relationship has deteriorated sufficiently for lawyers and courts to become involved.
A commercially effective agreement should give the business enough certainty to perform when the relationship is healthy and enough protection to respond when it is not.
How Kadernani & Company Legal Consultants Can Assist
Kadernani & Company Legal Consultants advises UAE and international businesses on the review, negotiation, drafting and restructuring of commercial agreements, including contracts involving complex performance obligations, significant financial exposure and cross-border enforcement considerations.
Our approach begins with the commercial structure rather than the precedent agreement.
Before proposing amendments, we seek to understand what the client is trying to achieve, where value sits in the transaction, which obligations are operationally critical and which events would create unacceptable financial or legal exposure.
That allows contractual issues to be prioritised rather than treating every amendment as equally important.
Depending on the transaction, our work may include reviewing and negotiating scope and acceptance mechanisms, payment protections, guarantees, liability caps, indemnities, insurance requirements, termination and transition rights, intellectual property provisions, confidentiality, data obligations, corporate authority, governing law and dispute-resolution clauses.
For transactions involving multiple jurisdictions, we also consider the relationship between the contractual structure and the practical enforcement position. That can include analysing UAE court jurisdiction, DIFC or ADGM considerations, arbitration provisions, the location of assets and the consequences of selecting one dispute forum over another.
Where a disagreement has already emerged, our disputes experience also informs the contractual analysis. A provision that appears commercially acceptable during negotiation can look very different when it must support an injunction, payment claim, damages case, termination notice, arbitration or enforcement proceeding.
The objective is not to produce the contract with the greatest number of legal amendments. It is to help the client reach a contract it understands, can operate and can rely upon when the commercial relationship is tested.
For boards, CEOs, general counsel and senior management, the practical test is straightforward: before the agreement is signed, can the business explain what it must deliver, when it must pay, what it could lose, how it can exit, where a dispute would be resolved and whether the resulting judgment or award could realistically be enforced?
If those answers are unclear, the contract is not yet only a legal drafting issue. It remains a commercial risk requiring resolution.