The Commercial Transactions Law in the UAE, Federal Decree-Law No. 50 of 2022, provides a central legal framework for commercial activities, business transactions, commercial obligations and certain aspects of commercial contracts in the United Arab Emirates. Businesses dealing with these issues may also require broader business law advice in the UAE where transactions involve wider contractual, corporate or regulatory considerations.
In force since 2 January 2023, the Law affects matters ranging from commercial sales and payment obligations to interest, commercial records, digital transactions and the time available to pursue certain claims between merchants.
For businesses, its importance is practical: contract terms concerning payment, delivery, notices, evidence and dispute resolution can directly affect how commercial rights are enforced.
What Is the UAE Commercial Transactions Law?
The UAE Commercial Transactions Law is Federal Decree-Law No. 50 of 2022 Concerning Promulgating the Commercial Transactions Law.
It replaced the previous Federal Law No. 18 of 1993 and came into force on 2 January 2023.
The Law covers a broad range of commercial matters, including:
- commercial activities;
- merchants;
- commercial books and records;
- commercial sales;
- commercial obligations;
- commercial loans;
- payment and interest;
- brokerage;
- commercial representation;
- banking operations;
- commercial papers; and
- technology-based commercial transactions.
It should not, however, be treated as the only legislation relevant to every UAE business contract.
Depending on the transaction, other laws may also apply, including the Civil Transactions Law, Commercial Companies Law, Commercial Agencies Law, arbitration legislation, financial regulation or sector-specific rules.
Who Does the Commercial Transactions Law Apply To?
Article 1 gives the Law a broad commercial scope.
It applies to merchants as well as physical and virtual commercial activities carried out through technological media or modern means of technology.
A transaction can therefore fall within the commercial framework because of:
- the status of the parties;
- the nature of the activity;
- the commercial purpose of the transaction; or
- a specific provision classifying that activity as commercial.
The Law expressly identifies a wide range of activities as commercial, including trading, banking and financial operations, commercial papers, commercial companies, insurance and virtual asset activities.
This makes classification important.
Before assuming that a specific limitation period, interest rule or commercial remedy applies, the parties should first establish whether the obligation in question falls within the relevant provision of the Commercial Transactions Law.
How Does the Commercial Transactions Law Interact With UAE Contract Law?
Commercial contracts in the UAE may be governed by more than one layer of legislation.
Article 2 of the Commercial Transactions Law establishes an important hierarchy.
Subject to mandatory commercial provisions, the agreement entered into by the parties generally governs their commercial relationship.
Where the contract does not resolve a matter and no applicable statutory commercial rule governs it, commercial custom may become relevant.
Where neither the legislation nor applicable commercial custom resolves the matter, relevant civil-law rules may apply insofar as they are consistent with the general principles of commercial activity.
This interaction became especially important in 2026.
Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law came into force on 1 June 2026 and repealed the previous Federal Law No. 5 of 1985.
As a result, businesses reviewing UAE commercial agreements in 2026 should avoid relying on contract templates or legal commentary that still treats the 1985 Civil Transactions Law as the current general civil-law framework.
The practical point is straightforward: the Commercial Transactions Law and Civil Transactions Law perform different but sometimes connected functions.
What Is the Limitation Period for Commercial Claims in the UAE?
One of the most important changes introduced by the current Commercial Transactions Law concerns the period for pursuing certain obligations between merchants.
Previous Position
Under the former Federal Law No. 18 of 1993, claims relating to commercial obligations between traders were generally subject to a ten-year period, unless a shorter statutory period applied.
Current Position
Article 92 of Federal Decree-Law No. 50 of 2022 provides that, where there is denial and no lawful excuse, cases relating to merchants’ obligations against each other are barred after five years from the date on which performance of the obligation falls due, unless the law provides a shorter period.
For example, if a qualifying B2B payment obligation becomes due under a commercial agreement, the due date may become critical when calculating the applicable period.
Does Every UAE Commercial Claim Have a Five-Year Limitation Period?
No.
The five-year rule should not be stated as a universal limitation period for every dispute connected with business activity.
Article 92 contains specific wording concerning obligations between merchants, and other legislation or transaction-specific provisions may establish different periods.
Different rules may arise in areas such as:
- cheques and commercial papers;
- carriage and transport;
- insurance;
- agency;
- defects in commercial sales;
- banking;
- arbitration;
- civil obligations; or
- other specialised transactions.
Businesses should therefore identify the legal nature of the claim before calculating the deadline.
Claims involving obligations or events that span the commencement of the 2022 Law may also require separate analysis rather than simply applying the new five-year period retrospectively without examining the relevant dates and legal framework.
How Does the Law Regulate Interest on Commercial Debts?
The Commercial Transactions Law contains several provisions dealing with interest, but those provisions should be read according to the type of obligation involved.
Interest on Commercial Loans
Under Article 72, a creditor may receive interest on a commercial loan at the rate specified in the contract.
If the contract does not specify the rate, the Law refers to the market rate prevailing at the time of the transaction, subject to the statutory ceiling of 9% stated in Article 72.
This does not mean that every overdue commercial invoice automatically attracts 9% interest.
Article 72 specifically addresses commercial loans, while other provisions deal with monetary commercial obligations and delay.
Delay Interest
Article 84 addresses a commercial obligation involving a sum of money that was certain when the obligation arose.
Where the debtor delays payment, the provision links compensation for the delay to the interest rules in Articles 72 and 73 unless the parties have agreed otherwise.
Article 85 further provides that the creditor does not need to prove damage caused by the delay in order for delay interest to accrue under the applicable provision.
Article 86 states that delay interest on commercial debts accrues from maturity unless the Law or agreement provides otherwise.
Businesses should therefore draft payment and interest clauses carefully rather than relying on assumptions about what will apply following late payment.
Does UAE Commercial Law Allow Compound Interest?
Article 88 states that a creditor may not claim compound interest, meaning interest on accumulated or frozen interest, or claim that interest as complementary compensation.
The treatment of interest can nevertheless become more complex in banking and financing disputes, where other financial legislation and judicial decisions may also be relevant.
Businesses should therefore distinguish between:
- contractual interest;
- interest on a commercial loan;
- delay interest;
- court-awarded interest; and
- compound interest.
They should not be treated as interchangeable concepts.
Does the UAE Commercial Transactions Law Cover Digital Transactions?
Yes.
The current Law expressly recognises technology-based commercial activity.
Article 10 permits commercial activities, contracts and transactions to be carried out, created or concluded wholly or partly through modern technological means or technological media, subject to applicable legislation.
It also provides that commercial contracts and transactions conducted through technology are governed by the same provisions applicable to equivalent transactions carried out physically.
The Law also recognises virtual commercial activities and activities relating to virtual assets, while leaving specific regulation of virtual assets and their service providers to the relevant legislation.
The commercial framework therefore does not depend on an agreement being signed on paper.
For businesses conducting online sales, platform transactions, SaaS arrangements or other digital commercial relationships, the more important questions are whether:
- the parties can be identified;
- the agreement and acceptance can be evidenced;
- the contractual terms are accessible;
- payment records are retained;
- notices can be proved; and
- electronic records are properly maintained.
What Does the Law Mean for Commercial Sale Contracts?
The Commercial Transactions Law contains specific rules governing commercial sales.
Under Article 93, the commercial-sale provisions apply where a sale is made between merchants for commercial affairs.
Article 94 is particularly useful from a drafting perspective.
It states that parties to a commercial sale contract should address matters including:
- an accurate description of the item sold;
- its price;
- payment terms;
- place of delivery;
- time of delivery;
- the mechanism for sending notices;
- the selected address for notices;
- dispute-resolution arrangements; and
- any additional terms agreed by the parties.
For a business, this provides a useful minimum framework when reviewing a supplier, procurement or B2B sale agreement.
A vague purchase arrangement that leaves price, payment dates, delivery, notices or dispute mechanisms uncertain can create avoidable enforcement problems later.
Businesses that regularly enter supply, distribution, service or trading agreements may benefit from having their terms reviewed as part of wider contract legal services in the UAE.
What Should UAE Businesses Review in Their Commercial Contracts?
A business does not need to reproduce the Commercial Transactions Law inside its contract.
It does, however, need contractual terms that work effectively within the legal framework.
1. Payment Terms
The agreement should clearly state:
- the amount payable;
- currency;
- invoice requirements;
- payment method;
- payment schedule;
- due date;
- any conditions that must be met before payment becomes due; and
- the consequences of late payment.
Terms such as “payment within a reasonable period” create unnecessary uncertainty when a clear number of days could have been specified.
2. Maturity and Due Dates
The date on which an obligation becomes due can have consequences beyond cash flow.
It may affect:
- default;
- delay interest;
- contractual remedies; and
- the calculation of applicable limitation periods.
For recurring supplier relationships, each invoice and payment milestone should therefore be documented clearly.
3. Description of Goods or Services
A commercial contract should define what the other party is actually required to provide.
For goods, this may include:
- specifications;
- quantity;
- quality;
- model;
- packaging;
- inspection requirements; and
- acceptance criteria.
For services, it may include:
- scope;
- deliverables;
- performance standards;
- milestones; and
- completion requirements.
4. Delivery and Performance
The agreement should establish:
- where delivery takes place;
- when delivery must occur;
- who is responsible for transport;
- when risk transfers;
- how acceptance is confirmed; and
- what happens if performance is delayed.
These issues become particularly important in supplier and distribution relationships.
5. Notices
Article 81 expressly addresses notices in commercial matters and recognises several mechanisms, including electronic methods and any means agreed between the parties.
The contract should therefore clearly define:
- where notices must be sent;
- permitted delivery methods;
- valid email addresses;
- when a notice is treated as received; and
- whether particular notices require a formal method.
A business should not assume that an informal message sent to the wrong employee will necessarily satisfy a contractual notice requirement.
6. Evidence and Records
Article 91 states that commercial obligations, whatever their amount, may generally be established through different means of evidence unless the Law or agreement provides otherwise.
Good documentation still matters.
Businesses should retain relevant:
- signed agreements;
- purchase orders;
- invoices;
- delivery records;
- acceptance records;
- payment confirmations;
- correspondence;
- amendments;
- notices; and
- acknowledgements of debt.
The contract and the operational record should tell the same story.
7. Interest and Late Payment
Where interest is commercially relevant, the agreement should state clearly:
- whether interest applies;
- the applicable rate or method;
- the circumstances triggering it;
- the relevant due date; and
- whether any sector-specific restriction applies.
Businesses should avoid copying financing or interest clauses from foreign contracts without checking their compatibility with UAE law.
8. Dispute Resolution
A contract should clearly identify how disputes will be handled.
Depending on the transaction, this may include:
- negotiation;
- escalation;
- mediation;
- UAE court litigation; or
- arbitration.
An unclear dispute clause can create a preliminary dispute about where the main dispute should be heard.
Where arbitration is intended, the clause should address the relevant institution or rules, seat, language and other necessary procedural elements.
9. Governing Law and Jurisdiction
Particularly in cross-border transactions, governing-law and jurisdiction clauses should be drafted deliberately.
A Dubai company contracting with an overseas supplier should not assume that inserting the words “UAE law” resolves every jurisdictional question.
The relevant emirate, court system, arbitration agreement, free-zone position and mandatory laws may all need consideration.
How Does the Commercial Transactions Law Affect B2B Debt and Unpaid Invoices?
Unpaid invoices are one of the most common ways in which the Commercial Transactions Law becomes relevant to day-to-day business.
A creditor seeking payment should first establish:
- the contractual obligation;
- the amount due;
- the maturity date;
- proof that goods or services were provided;
- any objections raised by the debtor;
- applicable notice requirements;
- any agreed interest provisions; and
- the applicable dispute-resolution mechanism.
Businesses should also consider Article 92 early rather than waiting until a debt has remained unpaid for several years.
Where voluntary payment fails, a commercial creditor may need to consider negotiation, formal notice, settlement or appropriate recovery proceedings. Businesses dealing with overdue B2B receivables can review their position with debt collection lawyers in the UAE.
Practical Commercial Contract Review Checklist
Before signing or renewing an important commercial agreement, check:
- Are the parties correctly identified?
- Is the commercial activity clearly described?
- Are goods, services and deliverables defined?
- Are price and payment terms unambiguous?
- Is there a specific payment due date?
- Are delivery and acceptance procedures documented?
- Does the contract explain how notices must be sent?
- Are interest and late-payment provisions legally appropriate?
- Are relevant records and evidence being retained?
- Is liability allocated clearly?
- Are termination rights defined?
- Is the dispute-resolution mechanism workable?
- Are governing law and jurisdiction clear?
- Does another UAE law or regulator apply to the transaction?
A structured review before execution can be significantly easier than resolving uncertainty after payment or performance has failed. Businesses preparing new agreements can also use professional contract drafting services to align commercial terms with the applicable UAE framework.
When Should a Business Seek Legal Advice?
Not every commercial transaction requires extensive legal documentation.
Legal review becomes more important where the transaction involves:
- high financial value;
- extended credit or payment periods;
- recurring supply obligations;
- exclusivity;
- distribution arrangements;
- cross-border parties;
- complex termination rights;
- guarantees;
- financing;
- regulatory requirements; or
- significant dispute exposure.
If a disagreement has already developed, the contract should be reviewed before significant enforcement steps are taken.
A payment dispute, for example, may involve contractual rights, limitation periods, evidential issues and procedural requirements at the same time.
Where a dispute cannot be resolved commercially, commercial litigation lawyers can assess the agreement, supporting evidence and available enforcement options.
Al Ramsy Advocates advises businesses on contracts, commercial obligations, payment disputes and wider business law matters in the UAE.
Frequently Asked Questions
What Is the Current Commercial Transactions Law in the UAE?
The current federal framework is Federal Decree-Law No. 50 of 2022 Concerning Promulgating the Commercial Transactions Law, which entered into force on 2 January 2023 and replaced Federal Law No. 18 of 1993.
What Is the Limitation Period for a Commercial Claim in the UAE?
Article 92 provides a five-year period for cases relating to obligations between merchants from the date the obligation becomes due, where the statutory conditions apply and unless a shorter period is provided by law.
The period applicable to a specific claim depends on its legal classification and any specialised legislation.
Does the UAE Commercial Transactions Law Allow Interest?
The Law contains provisions governing interest on commercial loans and certain monetary commercial obligations. Under Article 72, interest on a commercial loan may be agreed contractually. Where no rate is specified, the statutory provision refers to the prevailing market rate subject to a 9% ceiling.
Is Compound Interest Allowed Under UAE Commercial Transactions Law?
Article 88 provides that a creditor may not claim compound interest, meaning interest on accumulated interest, or claim it as complementary compensation. Banking and financing matters may also engage other legislation and relevant judicial decisions.
Are Electronic Commercial Contracts Recognised in the UAE?
Yes. Article 10 expressly recognises commercial contracts and transactions conducted through modern means of technology and provides that they are generally subject to the same rules applicable to equivalent physical transactions, subject to applicable legislation.
