What to Include (and Exclude) When Drafting Business Contracts

Every successful business relationship begins with a clear understanding of who is doing what, by when, and under which conditions. Yet, this clarity is often where contracts fall short. A single vague clause can turn a promising deal into a drawn-out dispute. In today’s fast-paced business environment, getting the basics right is no longer optional — it’s essential.

Across the UAE, companies are increasingly relying on digitally signed, bilingual, and legally enforceable contracts to keep up with modern operations. Electronic agreements are fully recognized under Federal Decree-Law No. 46 of 2021 on Electronic Transactions and Trust Services, provided they meet certain criteria. This shift to digital has brought efficiency, but it has also raised important questions:
Are your contracts drafted in a way that holds up if challenged? Would they still stand strong if a dispute moved from email threads to a courtroom? And if so, in which language?

Arabic remains the official language of UAE courts, which means English-only contracts without certified translations can create serious enforcement gaps. Many businesses now prepare bilingual contracts with clear language-priority clauses to avoid future confusion. Similarly, in DIFC and ADGM jurisdictions, electronic contracts and e-signatures follow common law principles, offering flexibility but also demanding precision.

The bottom line is simple: the stronger and clearer your contract, the less room there is for misunderstanding, delay, or legal risk down the line. In this article, we’ll break down what modern business contracts should include, what to leave out, and how to draft agreements that truly protect your interests.

Essential Elements Every Contract Should Include

Strong contracts aren’t built on pages of legal jargon — they’re built on precision, foresight, and enforceability. Below are the clauses that make the difference between a contract that simply exists and one that actually works when it matters most.

Clear Scope of Work

This is where many disputes begin. A well-defined scope goes beyond listing services; it clearly outlines deliverables, timelines, acceptance criteria, and mechanisms for change. Under the UAE Civil Transactions Law, ambiguity can lead courts to interpret terms against the drafter. That’s why modern contracts increasingly include formal change control procedures, ensuring that email exchanges or WhatsApp messages don’t accidentally alter the agreement. The more structured the scope, the stronger the legal footing if things go wrong.

Pricing & Tax Clauses

With corporate tax now in effect (Federal Decree-Law No. 47 of 2022) and VAT firmly established, pricing clauses need more than a number. Contracts should clearly state whether prices are VAT-inclusive or exclusive, as Article 38 of the VAT law assumes prices displayed to customers are inclusive unless stated otherwise. Forward-thinking companies are also including “change-in-law” provisions, protecting both sides if tax rates or regulations shift during long-term agreements. This is especially relevant for multi-year contracts or projects that cross financial years.

Payment Terms & Protections

Delayed payments are one of the most common commercial pain points. Strong contracts now incorporate specific timelines, structured milestone payments, and suspension or retention clauses to incentivize compliance. For high-value agreements, performance guarantees or advance payment securities are often added. These are not simply formalities — they are enforceable mechanisms recognized by UAE law and frequently relied upon in disputes.

Governing Law & Dispute Resolution

Choosing the right legal forum is more than a tick-box exercise. Onshore UAE courts operate in Arabic and follow civil law, whereas DIFC and ADGM courts apply common law and conduct proceedings in English. Arbitration (e.g., through DIAC 2022 rules) offers confidentiality and flexibility but requires the signatory to have specific authority — a common pitfall that can invalidate the entire clause. Businesses increasingly opt for clear, single-forum clauses to avoid conflicting interpretations or jurisdictional challenges.

Data Protection & Confidentiality

With the UAE Personal Data Protection Law (PDPL) now fully in force, data clauses can no longer be generic. Contracts should define roles (controller vs processor), processing purposes, cross-border transfer rules, retention periods, and security obligations. Breach notification timelines should align with regulatory expectations. Confidentiality clauses should also specify ownership of IP created during the engagement — a detail often overlooked but critical when technology or creative assets are involved.

Termination & Renewal Terms

Unclear exit terms can trap businesses in unwanted commitments. Sophisticated contracts now use fixed terms with defined renewal mechanisms and clear notice periods, ensuring neither side is surprised by an automatic rollover. Termination for cause typically includes material breach, insolvency, or sanctions — but savvy drafters also include termination for convenience with negotiated fees, giving both sides flexibility.

Authorized Signatories & Translations

A contract is only as strong as the authority behind the signature. UAE courts scrutinize whether the person signing had legal capacity, especially for arbitration clauses, which require explicit authority (as confirmed in multiple UAE Court of Cassation judgments). Additionally, because Arabic is the official court language, certified Arabic translations are essential for English contracts that may end up in onshore litigation. Many companies now include language-priority clauses to avoid conflicting interpretations between versions.

When these elements are thoughtfully drafted, they do more than protect a business legally — they set a clear framework for smooth operations, reduce the chances of disputes, and make enforcement far more straightforward if things go wrong.

Clauses That Often Cause Problems — What to Exclude or Handle with Care

When contracts go wrong, it’s rarely because something was missing — it’s usually because something unclear, unenforceable, or risky slipped through. In the UAE, where civil law principles apply onshore and common law governs DIFC/ADGM jurisdictions, certain clauses can create real legal friction if not handled carefully.

Vague or Open-Ended Terms

Phrases like “best efforts,” “reasonable endeavors,” or loosely defined scopes may seem harmless, but in UAE civil law, ambiguity is often interpreted against the drafter (Article 266 of the Civil Transactions Law). Unlike some common law systems, there’s no settled commercial meaning for these terms.

Courts rely on literal interpretation, and if a term can be read in multiple ways, enforceability weakens significantly. Instead, obligations should be expressed in measurable and objective language — e.g., specific timelines, deliverables, or performance metrics.

Unlimited Indemnities or Liability

Indemnity clauses that are unlimited in scope or value can lead to unexpected exposure. Under UAE law, damages are generally limited to actual, direct losses (Article 389 Civil Transactions Law) and must be proven. Indemnities that attempt to cover “any and all losses” — including indirect or punitive damages — are often narrowed by courts.

Moreover, unlimited liability clauses can conflict with insurance caps or create financial risks that are disproportionate to the contract value. Sophisticated drafters now set tiered caps or ** carve-outs for fraud and personal injury**, keeping liability both enforceable and commercially realistic.

Overly Broad Non-Compete or Non-Solicit Clauses

In commercial contracts, especially in distribution or services, non-compete clauses must be proportionate in scope, geography, and duration to be enforceable. Overly broad restraints are commonly struck down in UAE courts for conflicting with public policy (Article 102 of the Civil Code).

This is particularly relevant in employment-linked agreements, where the UAE Labor Law (Federal Decree-Law No. 33 of 2021) restricts non-competes to a maximum of two years and requires clear justification of business interests. In B2B contexts, the same principles apply by analogy — a restraint must be reasonably necessary to protect legitimate interests, not simply block competition.

Hidden Auto-Renewals

Clauses that automatically renew contracts without drawing clear attention to notice periods can trap parties into unwanted extensions. While not illegal, they’re often challenged on the basis of lack of informed consent. The UAE Commercial Code doesn’t void auto-renewal clauses, but courts expect clarity. Best practice is to include prominent renewal terms, clear notice deadlines, and a structured exit mechanism.

For example, some companies use dual reminders (contract + email notice) to avoid disputes later.

Punitive Damages Clauses

UAE law does not recognize punitive or exemplary damages. Compensation is based on actual harm proven, and parties cannot claim amounts that exceed this unless agreed as a liquidated damages clause (Article 390 Civil Transactions Law). However, even if agreed liquidated damages can be judicially reduced if they exceed the real harm suffered. Clauses that include phrases like “penalty,” “punitive,” or “exemplary” are red flags — they either won’t be enforced or will be adjusted by the court. The smarter approach is to set reasonable pre-estimated damages that reflect the likely loss.

Arbitration Clauses Signed by Unauthorized Persons

Arbitration is increasingly popular (especially under DIAC 2022 rules), but UAE courts have consistently held that the person signing the arbitration agreement must have explicit authority to bind the company to arbitration. This principle stems from multiple UAE Court of Cassation rulings. Without proper authority — typically through a notarised Power of Attorney or constitutional documents — the arbitration clause can be declared void, even if the rest of the contract is enforceable. This is a frequent and costly oversight in SME and family-run businesses.

Single-Language English Contracts for Onshore Disputes

While English contracts are standard in many industries, onshore UAE courts only accept Arabic. If a contract is not officially translated and certified, the Arabic version prepared later by one party could carry unintended meanings or distort nuances. This can tilt disputes significantly. Many experienced companies now prepare bilingual contracts upfront, including a language-priority clause specifying which version governs. This simple step prevents misinterpretations during translation or litigation.

Why this matters

Each of these clauses, if mishandled, can turn a straightforward business deal into months of legal wrangling or, worse, an unenforceable contract. By excluding or tailoring these problematic terms early on, businesses not only protect themselves legally but also avoid operational disruptions and reputational damage later.

Modern Additions to Consider in 2025

Contracts today must keep pace with how business is evolving. New technologies, regulatory frameworks, and industry standards are reshaping what should — and shouldn’t — appear in a well-drafted agreement. These additions reflect the realities companies are facing in 2025, especially in the UAE.

E-Signatures and Digital Trails

Electronic contracts are now standard, but their enforceability depends on how they’re signed. Under Federal Decree-Law No. 46 of 2021, e-signatures have full legal effect if they can reliably identify the signer and ensure document integrity. This is where trust service providers come in — licensed platforms that issue digital certificates and create verifiable audit trails.

Including clauses that specify the accepted signature methods and require a digital log of signature events helps prevent disputes over authenticity. In some cases, businesses also add fallback provisions stating when a wet-ink signature might still be required, such as for security agreements or government-related filings.

Data Processing Schedules

With the UAE Personal Data Protection Law (PDPL) now fully implemented, contracts that involve handling personal data need more than a simple confidentiality clause. A well-drafted data processing annex should set out lawful grounds for processing, define the purpose and scope, and establish rules for cross-border transfers.

It should also clarify security standards, retention timelines, and how data breaches will be reported. Regulators are paying close attention to contractual language, and vague clauses are increasingly being challenged. Clear obligations for both parties reduce the risk of non-compliance and potential penalties.

Compliance Clauses

Regulatory scrutiny is widening beyond banks and financial institutions. Anti-money-laundering (AML), anti-bribery, and sanctions compliance are now standard contractual features, particularly in cross-border deals.

These clauses typically include mutual commitments to comply with relevant laws, rights to request information or conduct due diligence, and clear termination triggers if a party becomes subject to sanctions or investigations. Including such clauses is not just legal housekeeping — it’s a way to protect your business from reputational and regulatory fallout.

Sector-Specific Terms

Generic contracts are no longer enough. Different industries face unique risks that demand tailored language:

Technology & SaaS contracts often include uptime guarantees, data localization rules, and clauses covering API stability or open-source use.
Construction and project agreements rely on delay damages, retention mechanisms, performance bonds, and detailed inspection regimes.
Distribution and agency agreements address territory exclusivity, sales targets, IP usage rules, and compensation obligations on termination.
Professional services contracts may include fee adjustment clauses, staff substitution rules, and clear acceptance procedures for deliverables.

By building these sector-specific modules into contracts from the outset, businesses reduce the need for rushed amendments later and ensure their agreements reflect operational realities.

Final Contract Review Checklist

Even the best-drafted contract can fall apart if critical details are overlooked right before signing. A short, focused review can prevent costly disputes later. Before you sign, make sure the following essentials are in place:

✅ Accurate Party Details
Check legal names, registered addresses, trade license numbers, and TRNs. Small errors here can complicate enforcement or tax reporting down the line.
✅ Scope, Pricing, and Timelines are Crystal Clear
Every deliverable, deadline, and payment amount should be unambiguous. Avoid last-minute “handshake” adjustments that don’t make it into the contract.
✅ Tax, Payment, and Dispute Clauses are Complete
Ensure VAT and corporate tax treatments are clearly stated, payment terms are practical, and the governing law and dispute resolution forum are explicitly chosen. Ambiguity here often causes the most expensive conflicts.
✅ Signatory Has Proper Authority
Particularly for arbitration clauses, UAE courts require that the person signing has explicit authority to bind the company. A quick check of powers of attorney or company documents can avoid the entire clause being declared void.
✅ Language and Translation Requirements Are Met
If the contract may be enforced in onshore UAE courts, confirm that a certified Arabic version exists and that a language-priority clause is included. This prevents translation disputes later.
✅ No Hidden or One-Sided Clauses Remain
Watch for auto-renewals, broad indemnities, or clauses buried in schedules that shift risk unfairly. A neutral review at this stage often catches issues that negotiations missed.

This final check might seem simple, but it’s often where the biggest mistakes are caught and fixed before they turn into problems. A few minutes of careful review can save months of legal trouble.

Well-drafted contracts give businesses a solid foundation to operate confidently. They reduce room for misunderstanding, protect commercial interests, and make enforcement straightforward when needed. A few careful decisions during drafting can save time, cost, and complications later.