Can You Cancel a Deal Because It Was Unfair? The One-Year Rule Under the UAE’s New Civil Code

Imagine a small supplier who urgently needs cash to pay his staff. A larger buyer knows this and offers to purchase his entire stock at a very low price. The supplier agrees because he has no other choice. Six months later, his business recovers, and he asks a simple question: can this deal be cancelled because it was unfair? Under the UAE’s new Civil Transactions Law, the answer may be yes, but only in limited situations and only within a strict time limit.

The new law, Federal Decree-Law No. 25 of 2025, came into force on 1 June 2026. It replaced the 1985 law and is the first full overhaul of UAE civil law in more than forty years. The basic principle has not changed: a signed contract must be respected. However, the law also recognises that some agreements are not made on a fair footing. One of the tools it provides to deal with this is the rule on exploitation, set out in Article 179.

Exploitation happens when one party takes advantage of the other party’s weak position to obtain terms that are heavily one-sided. Legal commentators describe this weak position in three common ways: an urgent need, such as a business that is short of cash or facing closure; a lack of experience, such as a person who is unfamiliar with the type of deal being made; or dependence, such as a party that relies heavily on the other for its income or survival. Two things must come together: a party in a vulnerable position, and a contract that is clearly and substantially unbalanced as a result. A tough price alone is not enough. It is worth noting that the older law already recognised a similar idea. The new law presents it in a more structured way and places clearer emphasis on contracts that are seriously out of balance.

The One-Year Deadline

Time is the most important part of this rule for business owners. Generally, a claim must be brought within one year from the date the contract was concluded. If the unfair pressure continues after signing, the one-year period does not start until that pressure ends. In every case, however, there is an absolute limit of three years from the date the contract was concluded, and after that the claim cannot be brought. A business that waits too long may therefore lose its right completely.

The court is not limited to cancelling the contract. Where exploitation is established, it may also adjust the contract and rebalance the obligations of both parties. This gives judges flexibility to reach a fair result while keeping a useful commercial relationship alive where possible. The rule is not limited to ordinary sales or service agreements, and lawyers have noted that it may also apply to settlement agreements.

It is equally important to understand what this rule is not. It is not a general way to escape a bad deal. Many commercial agreements are tough but valid. A price that turns out to be too low, a negotiation that was difficult, or a market that moved against you does not, by itself, amount to exploitation. The party making the claim should expect to provide clear evidence of both the vulnerability and the imbalance.

Consider a practical example. A small contractor is owed a large payment and is close to bankruptcy. The client knows this and offers a settlement of half the amount, adding that the offer will be withdrawn within two days. The contractor signs without legal advice. If the facts show that the contractor’s urgent need was used to obtain a very unfair result, he may have grounds to ask the court to review the settlement. By contrast, a contractor who simply accepts a lower fee after fair negotiation, with time to consider and advice available, would find it much harder to succeed.

What Businesses Should Do

If you are the stronger party in a deal, the safest approach is fair dealing. Negotiate in good faith, allow the other side enough time to review the contract, and take extra care when the other party is under obvious financial pressure. Keep written records of negotiations, market comparisons and the reasons for key terms, and avoid heavily one-sided terms that have no clear commercial reason. The new law also places duties on parties from the moment negotiations begin, and these duties cannot be removed by a contract clause. Fair dealing therefore matters before signing, not only after.

If you believe you were the weaker party, you should act quickly and not wait until the one-year period is almost over. Keep emails, messages, drafts and any proof of your situation at the time of signing, and seek legal advice early, before taking any step that could be read as accepting the contract.

In conclusion, the new rule does not threaten honest, balanced contracts. It protects businesses that were pushed into clearly unfair terms, and it reminds stronger parties that fair dealing is now more important than ever. Because of the strict time limits, businesses should review their recent deals and act early.

For businesses and individuals facing unfair contractual terms, exploitation or commercial disputes in the UAE, AY Advocates provides legal advice and representation on contract disputes, rescission and available remedies. Contact the firm to assess your contractual rights and understand the legal options available under UAE law.