The validity of a contract under UAE law depends upon the existence of essential elements, including consent, subject matter, cause, and legal capacity. Among these requirements, legal capacity occupies a pivotal role, as a person cannot validly create rights and obligations unless he possesses the legal competence recognized by law.

Federal Decree-Law No. 25 of 2025 on the Civil Transactions Law (“New Civil Transactions Law”), which entered into force on 1 June 2026, introduced substantial reforms concerning legal capacity and the contractual dealings of minors. Most notably, the law reduced the age of majority from twenty-one years to eighteen Gregorian years, thereby expanding the category of persons capable of independently entering into legally binding transactions.

Legal Capacity under the New Civil Transactions Law

The New Civil Transactions Law establishes the general principle that every person who has attained the age of majority, possesses full mental faculties, and is not subject to any legal restriction enjoys full capacity to exercise civil rights.

Article 84 expressly provides that a person acquires full legal capacity upon completing eighteen Gregorian years. This represents a significant departure from the previous Civil Transactions Law of 1985, under which majority was attained upon reaching twenty-one lunar years.

Classification of Minors

The law distinguishes between persons lacking discernment and those possessing discernment but who have not yet reached the age of majority. Article 85 provides that a person lacking discernment due to minority, insanity, or mental incapacity is incompetent to exercise civil rights. The same provision establishes that any child who has not completed seven Gregorian years shall be deemed non-discerning, while the age of discernment commences upon completion of seven years.

Consequently, the minors fall into two principal categories:

Non-Discerning Minor

A child below the age of seven is deemed incapable of understanding the legal consequences of his acts. Such a minor lacks contractual capacity altogether, and any legal transaction entered into independently by him is void and without legal effect. The rationale underlying this rule is the absence of legal intent and informed consent, both of which are indispensable elements of a valid juridical act.

Discerning Minor

A minor who has attained the age of seven but has not yet reached eighteen years possesses limited legal capacity. Article 86 categorizes such persons as having restricted capacity as prescribed by law. The law therefore evaluates the validity of transactions entered into by a discerning minor according to the nature and effect of the transaction itself.

Transactions of a Discerning Minor

Traditionally, UAE law classified a discerning minor’s transactions into three categories: transactions that are purely beneficial, purely detrimental, and those involving both benefit and detriment.

Transactions that are exclusively beneficial to the minor, such as accepting a gift or donation without any corresponding obligation, are valid. Conversely, transactions that are wholly detrimental, such as gratuitous dispositions of the minor’s property or waivers of rights, are void.

The most significant development introduced by the 2025 legislation concerns transactions involving both benefit and detriment. Under the previous Civil Transactions Law, such transactions were generally regarded as suspended pending ratification by the guardian or upon the minor attaining majority.

The new law adopts a different approach. Financial transactions concluded by a discerning minor that involve both potential benefit and detriment are deemed voidable in the minor’s interest rather than suspended. The guardian is granted the right to seek annulment within a prescribed period, and the minor may likewise challenge the transaction after attaining majority. This reform enhances transactional certainty while maintaining adequate protection for minors against exploitation or imprudent contractual commitments.

Judicial Authorization to Manage Property

A notable revolution introduced by Article 15 of the New Civil Transactions Law concerns the financial autonomy of discerning minors.

The provision permits a guardian, trustee, or a discerning minor who has attained fifteen Gregorian years to apply to the court for authorization to manage all or part of the minor’s assets. The court may impose conditions, limitations, or safeguards deemed appropriate and may subsequently modify or revoke such authorization. Transactions conducted within the scope of the judicial authorization are legally valid and enforceable.

This provision validates the legislature’s recognition that certain minors may possess sufficient maturity to responsibly administer their property while still requiring judicial oversight.

Conclusion

Federal Decree-Law No. 25 of 2025 modernizes the UAE’s legal framework governing contractual capacity by balancing two competing objectives: the protection of minors and the promotion of their gradual participation in economic life. By reducing the age of majority to eighteen years, redefining the status of transactions entered into by discerning minors, and permitting court-authorized management of assets from the age of fifteen, the law adopts a more flexible and commercially responsive approach.

The reduction of the age of majority to eighteen years will likely simplify many commercial transactions by enabling a larger segment of young adults to contract independently, open bank accounts, lease premises, and manage financial affairs without guardian intervention.

We at Ayesha Aldhaheri Advocates & Legal Consultants, we regularly handle contractual disputes involving termination, compensation, liability, and risk allocation. We assist clients in understanding their contractual rights and obligations and represent them in resolving disputes arising from the performance, suspension, or termination of contracts.