In-House Brief: Price Fluctuation Under the New UAE Civil Code: What Changed and What Did Not
Updated: Oct 14
Professor Indrawansa Samaratunga
Steven Hunt of C&IDS
11 October 2026
The UAE’s new Civil Transactions Law came into force on 1 June 2026 and replaced the Civil Code that had governed construction contracts since 1985.¹ It arrived at a difficult moment. The regional conflict has pushed up the cost of materials, shipping and insurance, and contractors on fixed prices are asking who carries the increase.
Much of the attention has fallen on Article 829, which deals with lump sum contracts. One reading now in circulation is that paragraph 1 of the Article ties the lump sum to a bar on recovering price increases, so that a lump sum contract can no longer carry a workable price fluctuation clause. If that were right, it would change how contracts across the region are drafted.
In our view it is not right. The rule in paragraph 1 is the rule the old Code already contained, stated more fully. What is new is paragraph 3, which gives courts and tribunals a power the old Code did not: to adjust time and price, or to bring the contract to an end, when exceptional events upset the bargain.
This paper compares the old and the new law on price fluctuation, for both lump sum and re-measured contracts, and identifies what remains unsettled. A companion Practice Note sets out the practical steps for contractors.
Supplements: how the position compares in Saudi Arabia and Qatar.
Two risks to which different laws and contract clauses apply
Construction contracts allocate two pricing risks that are often run together. The first is quantity: whether the contractor is paid for the work actually measured, or a fixed sum whatever the quantities turn out to be. The second is price: whether the contract sum moves with the cost of materials, labour and other inputs. The two are independent. This paper is concerned with the latter.
A lump sum contract can include a price adjustment clause, and a re-measured contract can exclude one. That gives four combinations, and the answer to any question about price fluctuation depends on which of them is in play.
The FIDIC Red Book illustrates the point. It is a re-measurement form, but its cost adjustment provision, Sub-Clause 13.8 in the 1999 edition, applies only if a table of adjustment data is completed. In this region the table is frequently left blank or the Sub-Clause deleted.³ Many Red Book contracts are therefore re-measured as to quantity but fixed as to rates/prices.
The old law
Article 887(1) of the old Code set out the lump sum rule in a single sentence:
“If a muqawala contract is made on the basis of an agreed plan in consideration of a lump sum payment, the contractor may not demand any increase over the lump sum as may arise out of the execution of the plan.”²
That left a lump sum contractor with no claim to an increase for carrying out the agreed design.³ The words were general. They did not mention materials or wages, but nobody doubted that they covered them.
Article 887 was not, however, treated as mandatory. Contractors recovered rising costs where the contract gave them a cost adjustment or escalation clause, and such a clause was a recognised route to recovery.² Commentary on the old Code described its price variation rules as falling outside public order, so that the parties could contract out of them.¹⁰
Without a clause, the only statutory route was Article 249, the general hardship provision. It allowed a judge to reduce an oppressive obligation to a reasonable level where exceptional and unforeseeable events of a public nature threatened the obligor with grave loss, and it could not be excluded. But the threshold was demanding, and the power was only to reduce the obligation. The Article did not expressly authorise an extension of time, an increase in the price or a termination.³
The new law
Article 829 has three paragraphs. The first restates the lump sum rule:
“If a Muqawala contract is concluded based on an agreed design in exchange for a lump-sum remuneration, the contractor may not claim any increase in the remuneration, even if the prices of the materials used in the work or the remunerations of the workers or other expenses have increased.”¹
The second deals with changes to the design. No increase is due for a modification or addition unless it results from the employer’s fault, or the employer authorised it and the increase was agreed. The fault limb is new.⁶
The third paragraph has no predecessor in the muqawala chapter of the old Code:
“If the contractual equilibrium between the obligations of both the employer and the contractor is disrupted due to general exceptional circumstances that could not have been foreseen at the time of contracting, thereby undermining the basis upon which financial assessment of the Muqawala contract was founded, the court may, depending on the circumstances and after balancing the interests of both parties, order the restoration of the contractual equilibrium, including the extension of the execution period, the increase or reduction of the remuneration, or may order the rescission of the contract.”⁴
Alongside it, Article 224 replaces Article 249 as the general hardship provision. It keeps the same conditions, fixes foreseeability at the time of contracting, and adds rescission as a remedy. Like its predecessor, it provides that any agreement to the contrary is void.⁴
The two Codes at a glance
Issue | Old Code (1985) | New Code (2025) | What changed |
Lump sum rule | Article 887(1). No increase over the lump sum for executing the agreed plan. | Article 829(1). No increase, even if materials, wages or other expenses have risen. | Wording only. |
Changes to the design | Article 887(2). A variation made with the employer’s consent is paid as agreed. | Article 829(2). Paid if due to the employer’s fault, or authorised with an agreed increase. | Employer fault added. |
Hardship in construction contracts | No specific provision. | Article 829(3). Court may extend time, adjust the price or rescind. | New. |
Hardship generally | Article 249. Court may reduce the oppressive obligation. Mandatory. | Article 224. Court may reduce the obligation or rescind. Mandatory. | Rescission added. |
Price adjustment clauses | Effective. Article 887 was a default rule. | Effective, on the prevailing view. | Nothing, subject to the courts. |
Does Article 829(1) prohibit price fluctuation clauses?
The argument that it does rests on the new words in paragraph 1: the contractor may not claim an increase “even if” prices, wages or other expenses have risen. On that reading, the Code now says in terms that a lump sum contractor cannot recover price fluctuation, whatever the contract provides. We do not think the argument survives a closer look, for four reasons.
The wording. The words “even if” attach to costs having risen. They say that a rise in costs is not, by itself, a ground for more money. They say nothing about a contract in which the parties have agreed that the price will move with costs.
The drafting technique. Where the new Code intends to override the parties’ agreement, it says so. Article 224 ends with the words “Any agreement to the contrary shall be void.” Article 829(1) contains nothing of the kind.
The commentary. The muqawala provisions of the new Code are widely described as mostly non-mandatory default rules that apply where the contract is silent.⁵,⁶ We have not found any commentator who suggests that a price adjustment clause in a lump sum contract is now ineffective.
The purpose. The new words have a job to do without that reading. They spell out what Article 887(1) left implicit, and they set up paragraph 3, which then creates the exception for exceptional events.
The better view is therefore that the change in paragraph 1 is one of wording, not substance. A lump sum contract with a price adjustment clause was effective under the old Code and remains effective under the new one.
The point has not been tested in court. Until it is, the sensible course is to remove the argument in the drafting, by stating that the adjustment clause applies notwithstanding Article 829(1).
Article 829(3): a safety valve, not a fluctuation clause
Paragraph 3 is the real change. A lump sum contract that says nothing about price fluctuation is exactly where it operates, and no contractual hook is needed to engage it. A contractor in that position had almost nothing under the old Code. It now has a statutory route to more time, more money or an exit.
It would be a mistake, however, to treat paragraph 3 as a price adjustment mechanism by another name.
The threshold is high. The circumstances must be exceptional and general, and unforeseeable at the time of contracting. They must disrupt the balance of the contract and undermine its financial basis. Under Article 249, war, sudden strikes, official price fixing and epidemics qualified. Routine cost fluctuation did not.³ Ordinary inflation stays with the contractor under paragraph 1.
It is a discretion. The court “may” act, after balancing the interests of both parties. It is likely to share the consequences between them in a way that reflects the original allocation of risk, and unlikely simply to shift the burden to the employer.⁴
The tribunal chooses the remedy. Time, price and rescission are all available. A contractor asking for money may be given time.
It runs both ways. The price may be reduced as well as increased, so an employer may invoke the provision if costs fall.
There is no self-help. Nothing is payable until the employer agrees or a tribunal orders it. A price adjustment clause, by contrast, feeds into every interim payment.
Foreseeability is judged at the date of the contract. Parties who signed after the conflict began on 28 February 2026 will be expected to have priced it in, although what they should have anticipated will become harder to say the longer it continues.⁴
Whether paragraph 3 can be excluded is the main point of disagreement. Most commentators treat it as non-mandatory, because it lacks the words that make Article 224 mandatory.⁴,⁷ At least one takes the opposite view.⁹ Others leave the question to the courts.³ Whichever is right, Article 224 remains, though without the express power to extend time or increase the price.
Re-measured contracts
For a re-measured contract the analysis is different on both points.
Article 829(1) applies by its terms to a contract concluded on an agreed design for a lump sum. It is not engaged where the works are re-measured. There is no statutory argument against a price adjustment clause, and nothing to draft around. Where there is no clause, the contractor still carries the price risk, but because its unit rates are fixed by the contract and not because of the Code.
The harder question is whether paragraph 3 is available at all. It sits within the lump sum Article, and several commentators describe it as specific to lump sum contracts.³,⁷,⁸ Its wording, however, refers to the financial basis of “the Muqawala contract” without limiting it to lump sums, and it has also been described as applying to muqawala contracts generally.⁴
If the narrower reading prevails, a re-measured contractor with fixed rates and no adjustment clause is left with Article 224 alone. The result would be odd. The contractor who is better protected on quantities would be worse protected against exceptional price increases than its lump sum counterpart. For that contractor, an express adjustment clause matters more, not less.
Which Code applies
Article 4(1) of the new Code provides that it does not apply to facts and transactions that preceded its coming into force.³ The prevailing view is that contracts concluded before 1 June 2026 remain subject to the old Code.⁶ There is a contrary suggestion that disputes arising after that date will generally fall under the new framework, even on earlier contracts.³
Many live projects straddle the date. Until the point is decided, a hardship claim on such a contract should be put under both Codes in the alternative.
What remains unsettled
Clause against Code. Whether an express price adjustment clause prevails over Article 829(1). The weight of opinion says that it does.
Exclusion. Whether Article 829(3) can be excluded, and whether a general “fixed price, no escalation” clause is enough to do so.
Re-measured contracts. Whether Article 829(3) reaches them.
Threshold. How severe the disruption must be before the financial basis of a contract is undermined.
Transition. Whether the new provisions apply to hardship that arises after 1 June 2026 on an earlier contract.
Conclusion
The suggestion that Article 829 has ended the lump sum contract with a price fluctuation clause is, in our view, mistaken. The lump sum rule is what it was. A contractor who wants protection against rising costs still needs an express clause, and an employer who wants price certainty still needs to resist one.
What has changed is the position where the contract is silent. A lump sum contractor now has a construction-specific route to time, money or an exit when exceptional events undermine the bargain, and the general hardship provision has gained a power of rescission. Neither is a substitute for an agreed mechanism. Both mean that a fixed price is no longer a complete answer to an exceptional event.
For those drafting and negotiating now, the lesson is to deal with the point expressly. Say whether the price adjusts, say how, and say what is to happen to Article 829(3). Silence leaves the answer to a tribunal’s discretion.
How to obtain the Practice Note
The companion "Practice Note: Price Fluctuation Under the New UAE Civil Code" sets out the practical steps for contractors before contract, during the works and when a claim arises. It is available to Steven's LinkedIn connections. If you are already connected with him, you will find it posted on his profile. If you are not, send him a connection request through his LinkedIn profile and you will secure access to the Note. Companion Practice Notes on Saudi Arabia and Qatar are available on the same basis.
C&IDS places fractional in-house construction counsel with contractors, developers and consultants across the GCC, Africa and the UK. If you would like to discuss how a placed counsel could support your team on price adjustment and hardship provisions in live projects or tenders, please get in touch at admin@candids.legal.
For more insights and content, subscribe to In-House Brief.
Notes
Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law UAE Ministry of Justice (English translation). Quotations from the new Code are from this translation. The Arabic text is authoritative and translations vary.
Challenges facing the Middle East construction industry: price escalation Clyde & Co (April 2022).
Hardship and Lump-Sum Price Adjustments under the New UAE Civil Code: Articles 224 and 829 Charles Russell Speechlys (2026).
Examining the New UAE Civil Code, Part 1: Force Majeure, Exceptional Circumstances and Relief in Times of Crisis Mayer Brown (19 May 2026).
Examining the New UAE Civil Code, Part 2: Muqawala Contracts Mayer Brown (3 June 2026).
The Impact of the New Civil Transactions Law on Construction Contracts in the United Arab Emirates K&L Gates (9 March 2026).
Rewriting the foundations: Key changes under UAE Federal Decree Law No. 25 of 2025 White & Case (2026).
The UAE’s New Civil Code: implications for construction projects Construction Law International, International Bar Association (July 2026).
UAE Civil Code 2025: five clauses every contractor should re-paper before 1 June Al Maazmi (2026).
Legal issues relating to construction contracts in the United Arab Emirates Global Arbitration News (27 November 2017).
This article is published for general information purposes only. It does not constitute legal advice.
