Civil Transactions Law · Federal Decree-Law 25 of 2025
Article 121
Section One: Sources of Obligation > Chapter One: The Contract > Part Three: Negotiations and the Obligation of Disclosure
English translation
1. The initiation of pre-contractual negotiations, their conduct, and their termination shall be in accordance with the requirements of good faith.
2. If negotiations are conducted, they do not create an obligation on the parties to conclude this contract.
3. Whoever negotiates or terminates negotiations in bad faith shall be liable to compensate the actual damage suffered by the other party. Compensation shall not include the expected benefits from the contract that was not concluded, or the lost opportunities in achieving such benefits, unless otherwise agreed.
4. Bad faith shall be deemed to include the deliberate failure to disclose material information that has a substantive effect on the validity of the contract.
Official translation, as published by the portal.
Official Arabic text
.1 يجب أن يكون اقتراح المفاوضات قبل التعاقدية وسيرها وقطعها وفق مقتضيات حسن النية.
.2 إذا تم التفاوض على العقد، فلا يُرتب التفاوض التزامًا على الأطراف بإبرام هذا العقد.
.3 يكون من يتفاوض أو ينهي التفاوض بسوء نية مسؤولاً عن تعويض الضرر الفعلي الذي أصاب الطرف الآخر ولا يشمل التعويض المصالح المتوقعة من العقد الذي لم يبرم، أو الفرص الضائعة في تحقيق تلك المصالح ما لم يُتفق على غير ذلك.
.4 يُعتبر من صور سوء النية تعمد عدم الإدلاء ببيان جوهري مؤثر في صحة العقد.
What it means when you sign
This article sets rules for the period before a contract is signed. Starting negotiations, conducting them and ending them must follow good faith. Negotiating does not oblige anyone to conclude the contract. A party who negotiates or ends negotiations in bad faith is liable for the actual damage the other side suffered. That compensation does not include the profit expected from the contract that was never made, or the opportunities lost in seeking that profit, unless the parties agreed otherwise. Bad faith includes deliberately withholding material information that has a substantive effect on the validity of the contract.
When you are about to sign, this article means that talks, term sheets and letters of intent do not on their own bind either side to sign. A clause saying that no party is bound before signing fits this article. It also means that deliberately hiding a material fact during negotiation can create liability, even before any contract exists.
Not yet cited in a Fahm report; shown because it sits in the same chapter as one that is.
Related articles
- Article 122Cited in Fahm reportsThis article sets a duty to disclose information.
- Article 123This article covers confidential information obtained during negotiations or under a contract.
- Article 18This article says which country's law governs property.
- Article 19Cited in Fahm reportsThis article says which country's law governs a contract's obligations, both its form and its substance.
- Article 20This article says which country's law governs obligations that do not come from a contract, such as those arising from an act that causes harm.
- Article 28This article deals with what happens once a foreign law has been found to apply.