Civil Law and UAE: Reliance Protection in Civil Law

1. Introduction

Reliance protection refers to the legal protection given to a person who reasonably relies upon another party’s words, conduct, contractual promises, representations, or established course of dealing and suffers loss because that reliance is later defeated.

In UAE civil law, reliance protection is not traditionally expressed through one single doctrine equivalent to the common-law doctrine of promissory estoppel. Instead, it is derived from a combination of principles such as:

• good faith;
• binding force of contracts;
• prohibition of abuse of rights;
• protection against fraud and misrepresentation;
• compensation for legally recognised harm;
• implied contractual obligations; and
• under the new Civil Transactions Law, express regulation of pre-contractual negotiations and disclosure.

A major legislative development must be kept in mind. Federal Decree-Law No. 25 of 2025 on the Civil Transactions Law came into force on 1 June 2026 and replaced the 1985 Civil Transactions Law. The new law retains good faith and significantly strengthens protection during the negotiation stage.

2. Meaning of Reliance Protection

Reliance protection becomes relevant where:

A person changes his position because he reasonably relies on another person's representation, promise, conduct, or contractual undertaking, and the other party subsequently acts inconsistently with that representation or undertaking.

For example:

A company tells a contractor that a project will proceed and instructs the contractor to mobilise equipment and employees. The contractor incurs substantial expenditure. If the company subsequently withdraws in circumstances amounting to bad faith, the contractor may have a claim for losses depending on the facts and applicable provisions of UAE law.

Reliance protection therefore seeks to prevent a party from:

1. inducing reliance;
2. obtaining a benefit from that reliance; and
3. subsequently acting inconsistently with the position it created,

where such conduct violates applicable legal duties.

3. Reliance Protection Under the Former UAE Civil Transactions Law

Historically, the principal statutory foundation was Article 246 of Federal Law No. 5 of 1985.

Article 246 required a contract to be performed:

• according to its contents;
• consistently with good faith; and
• together with obligations arising from law, custom and the nature of the transaction. 

This provision was important because contractual obligations were not necessarily limited to the literal words written in the agreement.

Thus, reliance could be protected through the broader obligation of good-faith performance.

4. Reliance and the New UAE Civil Transactions Law

The position has developed substantially from 1 June 2026.

The new Civil Transactions Law expressly regulates conduct during negotiations. The UAE Government explains that the new legislation introduces a framework for pre-contractual negotiations and disclosure of fundamental information, designed to support informed contractual decision-making and reduce disputes.

The new framework therefore recognises that legal protection can arise before a final contract is signed.

This is particularly important for reliance.

The basic structure is:

Negotiation → representation/conduct → reliance → expenditure or change of position → wrongful conduct → loss → possible liability

The new law addresses, among other matters:

• good-faith negotiation;
• termination of negotiations;
• disclosure of material information;
• confidentiality; and
• consequences of bad-faith pre-contractual conduct. 

This represents a significant development from the traditional 1985 framework, under which reliance during negotiations was generally approached through other civil-law doctrines rather than a comprehensive express pre-contractual regime.

5. Good Faith as the Principal Basis of Reliance Protection

Good faith is central to reliance protection.

Under the former Article 246 and the corresponding principle retained in Article 221 of the new Civil Transactions Law, contractual performance must comply with good faith. The new provision also recognises obligations arising from law, custom and the nature of the obligation.

Good faith can therefore require parties to:

• act honestly;
• avoid deception;
• avoid deliberately frustrating contractual performance;
• cooperate where cooperation is necessary;
• respect legitimate contractual interests; and
• refrain from exercising contractual rights abusively.

A party cannot necessarily rely on the literal wording of a contract while simultaneously behaving in a manner fundamentally inconsistent with the contractual relationship.

6. Reliance and Abuse of Rights

Reliance protection is also connected with the UAE doctrine of abuse of rights.

Under the former Article 106, exercise of a right could be unlawful where, among other circumstances:

• it intentionally infringed another person's rights;
• the intended interest was contrary to law, public order or morals;
• the desired benefit was disproportionate to the harm caused; or
• the exercise exceeded customary limits. 

This principle prevents contractual or civil rights from being exercised mechanically where the manner of exercise causes legally unacceptable harm.

Therefore:

contractual right ≠ unlimited right to disregard reliance

The precise application depends on the facts and the governing statutory framework.

7. Reliance Damages

Reliance protection does not necessarily mean that the claimant receives the benefit of the bargain.

A useful distinction is:

Expectation interest

The claimant seeks the benefit that would have been obtained if the transaction had been completed.

Reliance interest

The claimant seeks compensation for losses incurred because the claimant relied on the other party.

Examples of reliance losses can include:

• preparation expenses;
• professional fees;
• mobilisation costs;
• wasted expenditure;
• costs incurred in anticipation of performance;
• expenses arising from reliance on information or representations.

Under the new pre-contractual regime, bad-faith conduct may create liability for loss actually caused, while the statutory framework distinguishes such losses from lost profits.

8. Requirements for Reliance Protection

A claimant generally needs to establish the relevant legal elements rather than merely asserting that reliance occurred.

Important considerations include:

1. Representation or conduct

There must ordinarily be some statement, promise, contractual undertaking, course of conduct, or other legally relevant behaviour.

2. Reliance

The claimant must have acted or changed position because of that conduct.

3. Reasonableness

The reliance should be objectively justified in the circumstances.

4. Causation

There must be a causal connection between the relevant conduct and the loss.

5. Damage

A legally recognisable loss must be demonstrated.

6. Wrongfulness or breach of duty

Reliance alone does not automatically create liability. There must be a contractual, statutory, tortious, pre-contractual, or other legal basis for protection.

9. Reliance Is Not an Unlimited Doctrine

UAE civil law does not mean that every commercial expectation automatically becomes legally enforceable.

Courts may distinguish between:

• a genuine contractual commitment;
• preliminary negotiations;
• commercial optimism;
• a non-binding statement;
• a representation;
• an enforceable promise;
• fraudulent conduct; and
• bad-faith conduct.

Therefore, a party generally cannot argue:

"I expected the contract to happen, therefore I am automatically entitled to damages."

The court must examine the legal relationship, the parties' conduct, the evidence, the applicable statutory provisions and the actual loss.

10. Important UAE Case Laws

Case 1 — Dubai Court of Cassation, Judgment No. 288 of 2025

This decision is significant for the relationship between good faith and contractual rights.

The decision has been relied upon in subsequent discussion of good-faith performance. It illustrates that contractual conduct may be examined not merely by asking whether an action is technically permitted by the wording of the contract, but also by considering good faith and the legitimate interests of the counterparty.

Principle

A contractual right must be exercised consistently with the requirements of good faith.

Reliance significance

Where one party's conduct creates or affects the legitimate expectations of the counterparty, good faith may constrain the manner in which contractual rights are exercised.

Case 2 — Dubai Court of Cassation, Judgment No. 503 of 2025

This case concerned contractual enforcement and the principle that contractual commitments are binding.

The court emphasised the importance of performing contracts according to their terms and consistently with good faith.

Principle

The contract operates as the law of the parties, subject to mandatory legal restrictions.

Reliance significance

Once parties have entered into a binding agreement, a party's reliance upon contractual rights and obligations receives substantially stronger protection than a mere expectation arising from preliminary discussions.

Case 3 — Dubai Court of Cassation, Judgment No. 440 of 2016

The court considered the binding nature of contractual obligations and the relationship between contractual modification/termination and good faith.

The case has been discussed in connection with the principle that parties cannot simply revoke or modify their contractual arrangement contrary to the applicable legal rules.

Principle

Contractual obligations cannot ordinarily be unilaterally displaced where the legal requirements for doing so are absent.

Reliance significance

A party that has arranged its affairs around an existing contractual relationship has a stronger legal basis for reliance protection than a party relying merely upon informal negotiations.

Case 4 — Abu Dhabi Court of Cassation, Judgment No. 922 of 2020

The Abu Dhabi Court of Cassation expressly referred to the principle under Article 246 that contracts must be performed according to their terms and consistently with good faith. The decision concerned authority and subsequent affirmation in an arbitration context.

Principle

Good-faith contractual performance forms part of the UAE civil-law framework.

Reliance significance

Where a party's conduct subsequently confirms or validates an earlier position, the court may consider the parties' conduct and legal relationship rather than examining isolated formalities alone.

Case 5 — Dubai Court of Cassation, lease-assignment decision

In a lease-assignment dispute, the Dubai Court of Cassation applied Article 246 to obligations that were not expressly stated in the contractual language.

The court accepted that the contractual relationship could require the tenant to obtain the landlord's consent before assignment, even though the requirement was not expressed in precisely those words in the agreement.

Principle

Contractual obligations can arise from:

• law;
• custom;
• the nature of the transaction; and
• good faith.

Reliance significance

This demonstrates the importance of reasonable contractual expectations and ancillary obligations. A party cannot always rely upon the absence of an express contractual clause if the broader legal relationship imposes a corresponding obligation.

Case 6 — Access Group DWC LLC & Proex Partners Ltd v BLS International FZE, DIFC CFI 091/2023

This is a DIFC Courts decision and therefore should not be treated as a binding mainland UAE Court of Cassation precedent. It is nevertheless useful because the court discussed the former UAE Civil Code provisions concerning good faith and abuse of rights.

The court referred to Article 106 and Article 246 and explained that good-faith performance includes honest contractual conduct, avoidance of deception and abusive conduct, reasonable cooperation, and protection of the counterparty's legitimate interests.

Principle

Good faith affects the manner in which contractual rights and obligations are exercised.

Reliance significance

The case provides a useful judicial illustration of why legitimate interests and reliance can matter when determining whether contractual conduct is legally acceptable.

Case 7 — Al Ahmar v Radwan, ADGM CFI 2024/0011

This ADGM Courts decision applied UAE Civil Code principles in assessing contractual obligations and monetary relief.

The court referred to Article 246 and the requirement that contracts be implemented according to their provisions and consistently with good faith. It also considered the compensation provisions governing actual harm and loss of profit.

Principle

Good faith and compensation operate together in determining the consequences of contractual wrongdoing.

Reliance significance

The case demonstrates the practical importance of proving the contractual obligation, the breach, the resulting harm and the appropriate measure of compensation.

11. Relationship Between Reliance, Good Faith and Estoppel

The concepts should not be treated as identical.

The UAE civil-law approach is therefore broader than simply importing the common-law doctrine of estoppel.

12. Pre-Contractual Reliance Under the 2026 Framework

The new law is particularly important because the legal significance of negotiations has increased.

The UAE Government has stated that the new Civil Transactions Law establishes a framework for pre-contractual negotiations and disclosure of fundamental information.

Accordingly, parties should be careful about:

• making assurances concerning completion;
• requesting the other party to incur substantial expenses;
• withholding decisive information;
• terminating negotiations after deliberately creating strong reliance;
• using confidential information obtained during negotiations; and
• creating an impression that agreement is effectively certain when the party knows otherwise.

This does not mean that every negotiation must end in a contract. Parties generally retain freedom to negotiate and withdraw, but the manner of exercising that freedom may now attract greater legal scrutiny.

13. Evidence in Reliance Claims

Evidence is particularly important because reliance disputes frequently concern conduct occurring before or outside the final written contract.

Relevant evidence may include:

• emails;
• letters;
• WhatsApp or other business communications;
• draft agreements;
• meeting minutes;
• purchase orders;
• invoices;
• expenditure records;
• board resolutions;
• project mobilisation records;
• professional reports;
• representations made during negotiations; and
• evidence concerning the parties' previous course of dealing.

The claimant should demonstrate not simply that a statement was made, but how the statement caused the claimant to act and what measurable loss resulted.

14. Reliance Protection in Commercial Transactions

Reliance protection has particular significance in:

Construction

A contractor may incur mobilisation costs after receiving instructions or assurances.

Real estate

A purchaser may incur financing, professional or transaction costs based upon representations concerning a property.

Banking and finance

Borrowers or counterparties may rely upon representations regarding financing arrangements or contractual conditions.

Insurance

A policyholder may rely upon representations concerning coverage, disclosure requirements or claims handling.

Joint ventures

Parties may incur substantial preparatory expenditure while relying on representations concerning the future venture.

Technology transactions

Parties may rely on representations concerning system capabilities, implementation, security or regulatory compliance.

15. Limits on Reliance Protection

Reliance protection may be weakened where:

• the claimant knew the representation was false;
• reliance was unreasonable;
• the claimant ignored an express contractual disclaimer;
• the relevant statement was clearly preliminary;
• the claimant voluntarily assumed the commercial risk;
• the alleged loss is speculative;
• causation cannot be established;
• the claimant contributed to the loss; or
• the alleged representation was merely an expression of future intention without sufficient legal significance.

Thus, reasonable reliance and proof of causation are central.

16. Difference Between Reliance and Legitimate Expectation

The terms are related but should not be confused.

Reliance focuses on the claimant's conduct:

"I acted because of what the other party said or did."

Legitimate expectation focuses more broadly on whether the circumstances justify an expectation that the other party would behave consistently with its previous position.

In UAE private law, these concepts are generally channelled through statutory doctrines such as good faith, contractual obligations, abuse of rights, misrepresentation, damages and the new pre-contractual rules rather than through one standalone doctrine called "legitimate expectation."

17. Remedies

Depending upon the legal basis of the claim, possible remedies may include:

1. Compensation for actual loss
2. Restitution
3. Rescission or avoidance where legally available
4. Enforcement of a binding contractual obligation
5. Compensation for consequential loss where legally recoverable
6. Moral damages where the applicable legal requirements are satisfied
7. Other appropriate judicial relief

The appropriate remedy depends upon whether the case concerns contractual liability, tortious liability, pre-contractual liability, fraud, abuse of rights, or another cause of action.

18. Importance of Reliance Protection in UAE Civil Law

Reliance protection serves several important functions.

A. Commercial certainty

Businesses can structure transactions with greater confidence when legally significant commitments are respected.

B. Protection against opportunistic conduct

A party should not ordinarily be able to create legitimate reliance and then exploit that reliance through legally wrongful conduct.

C. Good-faith performance

Reliance protection gives practical meaning to the statutory good-faith requirement.

D. Fair negotiation

The new Civil Transactions Law brings greater legal discipline to the negotiation stage.

E. Compensation

Where reliance produces legally recognised loss through wrongful conduct, civil liability can provide a mechanism for compensation.

F. Protection of transactional trust

Modern commercial transactions depend heavily upon information, representations and cooperation. Reliance protection helps preserve confidence in those relationships.

19. Critical Legal Analysis

The UAE approach to reliance protection can be understood as an integrated civil-law system rather than a single doctrine.

Under the former 1985 framework, reliance was principally protected indirectly through:

good faith + abuse of rights + contract law + tort + fraud/misrepresentation + damages.

Under the 2025 Civil Transactions Law, effective from 1 June 2026, the framework has moved further toward explicit regulation of the pre-contractual stage, including good-faith negotiations and disclosure obligations.

This is particularly important because modern commercial disputes frequently arise before the final contract is signed.

The practical question is therefore no longer simply:

"Was there a contract?"

It may also be:

"What did the parties say and do while attempting to form the relationship, what reliance did that conduct reasonably create, and did either party breach a legal duty by the way it acted?"

20. Exam-Oriented Conclusion

Reliance protection in UAE civil law is the protection afforded to legally significant reliance upon contractual promises, representations, conduct and established relationships. Traditionally, the protection was derived principally from good faith under Article 246, abuse of rights under Article 106, contractual obligations, tort principles and compensation rules of the former Civil Transactions Law.

The new Civil Transactions Law, Federal Decree-Law No. 25 of 2025, effective from 1 June 2026, strengthens this framework by expressly regulating pre-contractual negotiations and disclosure.

The leading judicial principles illustrated by the cases above show that UAE civil law does not generally treat contractual rights as completely isolated from the conduct and legitimate interests of the counterparty. Good faith, causation, actual harm and the nature of the legal relationship remain central to determining whether reliance deserves legal protection.

Quick Revision Formula

Reliance Protection =

Representation/Conduct + Reasonable Reliance + Change of Position + Wrongful Conduct/Breach of Duty + Causation + Proven Loss = Possible Civil Liability

Key authorities:

1. Dubai Court of Cassation, Judgment No. 288/2025
2. Dubai Court of Cassation, Judgment No. 503/2025
3. Dubai Court of Cassation, Judgment No. 440/2016
4. Abu Dhabi Court of Cassation, Judgment No. 922/2020
5. Dubai Court of Cassation — lease-assignment decision applying Article 246
6. Access Group DWC LLC & Proex Partners Ltd v BLS International FZE, DIFC CFI 091/2023
7. Al Ahmar v Radwan, ADGM CFI 2024/0011

Note: Cases decided under the former 1985 Civil Transactions Law should be read with care for disputes governed by the new law from 1 June 2026; their underlying principles may remain relevant, but statutory article numbering and the pre-contractual framework have changed.