UAE Commercial Transactions Law

Federal Decree-Law No. (50) of 2022

The UAE Commercial Transactions Law issued under Federal Decree-Law No. (50) of 2022 constitutes the principal legislative framework regulating commercial activity in the United Arab Emirates. It establishes the legal rules governing the nature of commercial acts, the status of merchants, the organization of commercial records, contractual and financial obligations, banking operations, and negotiable instruments, including cheques.

This framework does not merely define commercial concepts; it creates an integrated legal system designed to ensure stability in financial dealings and reinforce confidence in the investment environment.

Commercial Activity in General

The law sets out the foundational principles of commercial activity by defining which acts are considered commercial, regulating the legal status of those who carry them out, and imposing financial and organizational obligations that accurately reflect their economic position.

The governing principle is that any act performed by a merchant for the purposes of trade is deemed a commercial act. Acts undertaken with the intention of generating profit are likewise considered commercial, even if carried out by a non-merchant. An act may also acquire a commercial character where expressly designated by law or where it is connected to, preparatory to, or facilitating a primary commercial activity.

Commercial Acts

The law identifies activities that are commercial by their nature, including:

• Purchase of movables for resale or lease

• Banking and exchange operations

• Activities relating to negotiable instruments

• Maritime and air navigation

• Construction, sale, lease, and maintenance of vessels and aircraft

• Commercial company formation

• Insurance contracts

• Non-judicial auction sales

• Hospitality, utilities, telecommunications, and logistics activities

• Operations involving digital platforms and virtual assets

Certain activities become commercial when practiced professionally, such as brokerage, commercial agency, supply contracts, transportation, contracting works, industry, tourism services, and the operation of electronic platforms and applications.

Activities of a purely personal, agricultural, or individual creative nature are not considered commercial unless carried out as a professional enterprise.

The Merchant

A merchant is defined as any person who conducts commercial activities in their own name and for their own account as a profession. A company is also deemed a merchant when it undertakes commercial activity.

Certain entities—such as government bodies and regulated professional practitioners—do not acquire merchant status unless they engage in commercial activities within the meaning of the law.

Eligibility to conduct trade requires legal capacity. The law prohibits commercial practice by persons declared bankrupt without rehabilitation or those convicted of offenses affecting honesty and trust. Registration in the Commercial Register is a key legal requirement regulating commercial dealings.

Commercial Books and Records

Merchants are required to maintain commercial books reflecting their financial position, rights, and obligations with accuracy and transparency.

Mandatory records include:

• The Daily Journal

• The General Ledger

These records must be properly organized, free of alteration, and retained for at least five years. Commercial books carry evidentiary value before the courts and may be examined in disputes to establish legal and financial positions.

Commercial Obligations and Contracts

The law regulates financial obligations arising from commercial transactions and requires that such obligations be clearly defined and determinable in amount.

It prohibits increasing an obligation solely in exchange for deferring payment, rendering any contrary agreement void. The promise to contract is treated as a binding commitment upon the promisor, giving rise to compensation where unjustifiably withdrawn.

Banking Operations

The legal framework governs relationships between financial institutions and clients, regulating deposits, accounts, loans, and credit facilities.

Bank Deposits

A monetary deposit constitutes a contract whereby the bank undertakes to return an equivalent amount upon demand or under agreed conditions. The deposit is considered a debt owed by the bank, and legal set-off may occur between the account balance and obligations due to the bank.

Accounts and Transfers

Accounting entries regulate the legal relationship between bank and client, with the final balance determining the creditor-debtor position of the parties.

Loans and Credit Facilities

A banking loan obliges the bank to provide funds or credit to the borrower under agreed conditions, while the borrower must repay the principal and agreed charges within specified periods, supported by adequate guarantees.

Negotiable Instruments

The law regulates commercial instruments as tools of credit, circulation, and payment, establishing the legal structure governing their issuance, transfer, and enforcement.

Bill of Exchange

Rules govern endorsement, maturity, payment, recourse upon non-payment, and limitation periods. The drawer must ensure the availability of funds with the drawee, and signatories bear joint liability toward the holder.

Promissory Note

A promissory note contains an unconditional undertaking to pay a specified sum and is subject, where appropriate, to provisions applicable to bills of exchange.

Cheque

A cheque is an instrument ordering a bank to pay a specified amount to the beneficiary or bearer and is payable upon presentation. It must be supported by sufficient funds at issuance, and endorsers remain jointly liable to the lawful holder. The law also regulates limitation periods and enforcement procedures to maintain certainty and speed in commercial circulation.

Jurisdictional Application

This legislation applies across the United Arab Emirates, including Dubai, in regulating commercial activities, financial transactions, and the legal relationships arising from trade.

Relationship to Legal Representation

For legal representation in matters arising under this law, visit our
Commercial Law Services in Dubai page:

/commercial-law-dubai