Draft Agreement Between Two Companies in the UAE

An agreement between two companies establishes the legal and commercial framework governing a relationship between separate corporate entities. It may cover the supply of goods, provision of services, joint projects, licensing, distribution, outsourcing, technology, marketing, or another business arrangement.

The agreement should identify the responsibilities of each company, the financial terms, performance requirements, decision-making procedures, and the consequences if either company fails to meet its obligations.

Corporate agreements can become difficult to manage where negotiations are conducted through several employees, different companies within the same group participate in performance, or important commercial terms remain spread across quotations, emails, and purchase orders.

Abdulrahman Alshaali Advocates & Legal Consultants assists UAE and international businesses with preparing and reviewing agreements between companies under UAE law.

Agreements Between Companies Under UAE Law

Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law provides the general contractual framework applicable to civil obligations in the UAE.

Where the transaction is commercial, Federal Decree-Law No. 50 of 2022 Promulgating the Commercial Transactions Law may also apply.

The Commercial Transactions Law recognises companies carrying on commercial activities or adopting legal forms established under the Commercial Companies Law as merchants for the purposes of the legislation.

Commercial transactions may also be concluded through modern technological means, subject to the applicable legislation governing electronic transactions.

The legal framework therefore depends on the actual transaction rather than simply on the fact that both parties are companies.

For example, a contract for recurring product supplies may require different provisions from an agreement through which two businesses collaborate on developing a new project.

The drafting process should identify the legal and commercial structure first and then develop provisions appropriate to that relationship.

Identifying the Correct Corporate Parties

The agreement should use the correct registered legal name of each company.

This is particularly important where companies operate through:

• Corporate groups.
• Branches.
• Subsidiaries.
• Similar trading names.
• Different entities in several jurisdictions.

For example, negotiations may be conducted by employees of an international parent company while the UAE subsidiary is intended to perform the contract.

The agreement should establish clearly which entity assumes the contractual obligations.

A reference only to a commercial brand may not identify the legally responsible company sufficiently.

The parties should verify relevant corporate information before signing, including where appropriate:

• Registered company name.
• Legal form.
• Trade licence details.
• Registered address.
• Jurisdiction of incorporation.
• Authorised representative.

Correct identification becomes particularly important if payment, enforcement, or liability later becomes disputed.

Verifying Authority to Sign on Behalf of Each Company

A company acts through authorised individuals.

The person negotiating an agreement is not necessarily authorised to bind the company legally.

Before execution, the parties should consider the authority of the proposed signatories.

Depending on the company structure, authority may arise through:

• Constitutional documents.
• Management appointment.
• Board or shareholder resolutions.
• Delegated signing authority.
• A valid power of attorney.

For example, a sales manager may have authority to negotiate commercial terms but not authority to sign a five-year agreement creating substantial financial obligations.

The contract should be signed by individuals whose authority is appropriate to the transaction.

Where a substantial agreement is involved, reviewing corporate authority before execution can reduce later disputes about whether the company became bound.

Defining the Commercial Relationship

The agreement should explain what the two companies intend to do together.

Possible arrangements include:

• Supply and purchase of goods.
• Service provision.
• Distribution.
• Outsourcing.
• Technology implementation.
• Manufacturing.
• Marketing collaboration.
• Project development.
• Licensing.
• Strategic cooperation.

The contractual structure should correspond to the actual relationship.

For example, two companies may describe their arrangement as a “partnership” even though one company simply provides marketing services to the other.

Using inaccurate terminology can create unnecessary uncertainty about the parties’ intended rights and obligations.

Where the parties intend to establish a more integrated collaborative business project, a Draft Joint Venture Agreement may provide a more appropriate structure.

Where one company simply provides defined commercial services to another, a Draft Service Agreement may be more suitable.

Establishing Each Company’s Responsibilities

The agreement should identify what each company must provide.

Responsibilities should be allocated separately rather than described through broad statements that both companies will “cooperate.”

For example, Company A may be responsible for manufacturing products.

Company B may be responsible for marketing and distributing them within an agreed territory.

The agreement should then address matters such as:

• Product production.
• Quality standards.
• Marketing activities.
• Regulatory approvals.
• Customer support.
• Logistics.
• Reporting.
• Payment collection.

Where one company’s obligations depend on the other company’s performance, that dependency should be addressed.

For example, Company B may be unable to market a product until Company A supplies approved marketing materials.

The contract should establish how delays affecting interconnected obligations will be managed.

Scope of Products or Services

The agreement should identify the goods or services covered by the relationship.

This can be achieved through the principal agreement or detailed schedules.

For goods, relevant information may include:

• Product descriptions.
• Specifications.
• Quantities.
• Models.
• Quality requirements.
• Packaging.
• Delivery requirements.

For services, the agreement may identify:

• Scope of work.
• Deliverables.
• Service levels.
• Timelines.
• Required personnel.
• Performance standards.

For example, an agreement stating that one company will provide “IT services” may be insufficient where the parties expect cybersecurity monitoring, cloud support, maintenance, and emergency response.

The scope should be detailed enough to determine whether requested work falls within the agreed obligations.

Pricing and Payment Between Companies

The agreement should establish the financial arrangements clearly.

Depending on the transaction, payment may involve:

• Fixed fees.
• Unit pricing.
• Monthly charges.
• Milestone payments.
• Revenue sharing.
• Commissions.
• Volume-based pricing.
• Reimbursable expenses.

The contract should explain how amounts are calculated and when they become payable.

For example, a distributor may receive a commission calculated as a percentage of collected customer revenue.

The agreement should clarify whether the calculation is based on invoiced revenue or amounts actually received.

Payment provisions may also address:

• Currency.
• Invoice requirements.
• Payment period.
• Applicable taxes.
• Approved expenses.
• Credit notes.
• Payment disputes.

The parties should avoid leaving essential financial arrangements to informal practices established after performance begins.

Purchase Orders and Individual Transactions

A continuing relationship between companies may involve multiple transactions.

The parties may use a framework agreement together with individual purchase orders.

The framework agreement establishes general legal and commercial terms.

Purchase orders can then specify details such as:

• Quantity.
• Price.
• Delivery date.
• Delivery location.
• Product specification.

The agreement should establish when a purchase order becomes binding.

For example, a buyer may issue an order that requires written acceptance by the supplier before an obligation arises.

The parties should also determine what happens if a purchase order contains terms that conflict with the framework agreement.

A contractual hierarchy can establish which document takes priority.

Without such a provision, competing standard terms printed on quotations, orders, and invoices may create uncertainty.

Delivery and Performance Obligations

Where goods are involved, the agreement should address delivery.

Relevant matters may include:

• Delivery location.
• Delivery date.
• Transportation.
• Packaging.
• Documentation.
• Inspection.
• Risk allocation.

Where services are involved, equivalent provisions may address the performance timetable and completion requirements.

For example, a supplier may agree to deliver products to several UAE locations.

The agreement should identify who arranges transportation and when delivery is considered completed.

If installation is also required, the parties should clarify whether installation forms part of delivery or is a separate obligation.

Where international trade is involved, customs, import responsibilities, and agreed trade terms may require additional consideration.

The agreement should reflect the actual logistics rather than rely on general wording such as “delivery as agreed.”

Quality Standards and Acceptance

The receiving company may need to verify whether goods or services satisfy the agreed requirements.

The agreement may therefore establish an acceptance procedure.

For products, this may involve:

• Inspection.
• Quantity verification.
• Testing.
• Quality assessment.

For services, it may involve:

• Deliverable review.
• Performance testing.
• Completion certificates.
• Written approval.

For example, Company A may supply industrial equipment to Company B.

Company B may require testing after installation before confirming acceptance.

The contract should establish what standards apply and how deficiencies will be reported.

An acceptance procedure should distinguish defects from new requirements that were not included in the agreed scope.

Where payment depends on acceptance, the procedure should be sufficiently clear to determine when payment becomes due.

Managing Contract Changes

Commercial relationships evolve.

The parties may later wish to change:

• Product quantities.
• Pricing.
• Services.
• Territory.
• Project timetable.
• Technical requirements.
• Delivery arrangements.

The agreement should establish how changes are approved.

For example, operational employees may discuss additional services during meetings.

If those employees are not authorised to amend the contract, a later disagreement may arise over whether the additional work should be paid for.

A variation procedure may require changes to be approved by specified authorised representatives.

It may also require the parties to document any effect on price or deadlines before additional work begins.

This helps separate ordinary operational instructions from amendments that change the companies’ contractual obligations.

Agreements Involving Companies Within the Same Corporate Group

Transactions sometimes involve affiliates or subsidiaries that are not parties to the principal agreement.

The contract should address these arrangements expressly.

For example, Company A may sign an agreement but expect its subsidiaries to order services from Company B.

The parties should determine:

• Whether subsidiaries may place orders.
• Whether each subsidiary enters a separate contract.
• Which entity is responsible for payment.
• Whether the parent company provides any guarantee.
• Whether information may be shared between group companies.

Membership in the same corporate group does not automatically make one company liable for another company’s contractual obligations.

If the parties intend a parent company or another affiliate to assume responsibility, that arrangement should be documented appropriately.

Confidential Information Between Companies

Commercial agreements often require companies to exchange sensitive information.

This may include:

• Customer information.
• Pricing.
• Business plans.
• Technical information.
• Product designs.
• Financial data.
• Supplier arrangements.
• Proprietary procedures.

The agreement should establish how such information may be used and disclosed.

Where confidentiality is particularly important, a Draft Confidentiality Agreement or draft nda agreement may be used alongside the main commercial agreement.

The parties should identify who may access confidential information.

For example, disclosure to employees who require the information for contract performance may be permitted, while broader internal distribution may not be appropriate.

The confidentiality arrangement should also address information held by subcontractors or professional advisers where necessary.

Intellectual Property Between Companies

A relationship between businesses may involve existing intellectual property or the creation of new materials.

Examples include:

• Software.
• Trademarks.
• Product designs.
• Technical drawings.
• Marketing materials.
• Databases.
• Written content.

The agreement should distinguish intellectual property owned before the relationship from work developed during the project.

For example, a technology company may use its existing software platform while developing custom features for a client.

The parties should establish which rights remain with the technology provider and what rights the client receives in the custom developments.

A payment obligation alone should not be assumed to determine intellectual property ownership.

Where a licence is granted, the agreement should establish its scope, duration, territory, and permitted use where appropriate.

Exclusivity Between Companies

One company may request that the other work exclusively with it in a particular market or for a specific activity.

Exclusivity can significantly affect both companies’ commercial opportunities.

The agreement should define its scope carefully.

For example, a distributor may receive exclusive rights to sell specified products in a particular territory.

The parties should establish whether exclusivity depends on:

• Minimum purchases.
• Sales targets.
• Marketing investment.
• Opening specified locations.
• Other performance conditions.

The agreement should also consider whether the restriction affects online sales or customers operating across multiple territories.

Exclusivity provisions should be assessed against any competition, commercial agency, or sector-specific requirements applicable to the transaction.

A broad restriction should not be included simply because exclusivity is commercially attractive.

Subcontractors and Third-Party Providers

A company may use subcontractors or other businesses to perform part of its contractual obligations.

The agreement should establish whether this is permitted.

For example, a logistics provider may engage independent transport companies to complete deliveries.

The customer may accept subcontracting but expect the original provider to remain responsible for performance.

The agreement may address:

• Approval requirements.
• Responsibility for subcontractors.
• Confidentiality.
• Regulatory compliance.
• Security requirements.
• Access to customer premises.

Where the identity of the service provider is commercially important, the customer may require specific work to be performed by named personnel or entities.

The contract should reflect the operational reality rather than silently assuming that each company will perform every obligation itself.

Regulatory and Licensing Responsibilities

Each company should determine whether it has the licences and approvals required for its contractual activities.

The agreement may allocate responsibility for obtaining specified permissions.

For example, one company may manufacture a product while the other imports and distributes it in the UAE.

The parties should determine who is responsible for:

• Import approvals.
• Product registrations.
• Local licences.
• Regulatory filings.
• Required certifications.

A contractual provision stating that a company will comply with applicable law does not remove the need to identify important transaction-specific approvals.

Where regulatory permission is essential to performance, the agreement should consider what happens if approval is delayed or refused.

The parties should not proceed on the assumption that the other company holds every necessary authorisation without appropriate verification.

Maintaining Commercial Records

Commercial relationships generate records beyond the signed agreement.

These may include:

• Purchase orders.
• Invoices.
• Delivery records.
• Acceptance certificates.
• Emails.
• Change requests.
• Payment confirmations.
• Meeting records.

Article 91 of the Commercial Transactions Law generally permits commercial obligations to be proved by all means of evidence unless legislation or an agreement provides otherwise.

This makes organised commercial records important.

For example, a supplier may need delivery documentation to demonstrate that goods were received.

A service provider may need written change approvals to establish that additional work was authorised.

The parties should also comply with any contractual requirement specifying a particular form of notice or approval.

Maintaining accurate records can substantially reduce uncertainty when a disagreement arises.

Company-to-Company Guarantees and Security

Some transactions require additional protection against payment or performance risk.

A company may request:

• A corporate guarantee.
• Security over specified assets.
• Advance payment protection.
• Another legally appropriate security arrangement.

For example, a supplier may contract with a newly established subsidiary but require a guarantee from the parent company.

The guarantee should be documented expressly.

The supplier should not assume that the parent company is liable merely because it controls the subsidiary.

The appropriate security mechanism depends on the transaction and applicable law.

Where the arrangement includes financing, a separate draft loan agreement and related security documentation may be required.

The legal requirements for creating and perfecting security should be considered separately from the principal commercial agreement.

Duration, Renewal, and Long-Term Commercial Relationships

The agreement should state how long the relationship will continue.

It may operate:

• For a fixed term.
• Until a specified project is completed.
• On a renewable basis.
• Until terminated according to agreed provisions.

For long-term relationships, the parties should consider how commercial terms may change over time.

For example, a three-year supply arrangement may require a defined pricing adjustment mechanism.

The contract should establish whether renewal occurs automatically or requires express agreement.

It may also specify a notice period for non-renewal.

Businesses should review renewal provisions before the relevant deadline rather than discovering after expiry that the agreement automatically continued for another term.

Terminating an Agreement Between Two Companies

The agreement should identify circumstances in which the relationship may end.

Termination provisions may address:

• Expiry.
• Termination on notice.
• Material breach.
• Non-payment.
• Loss of required licences.
• Insolvency-related circumstances, subject to applicable law.
• Prolonged inability to perform.
• Other transaction-specific events.

The parties should distinguish breaches that can be remedied from circumstances that may justify a different contractual response.

Where a remedy period applies, the agreement should establish how notice is given and when the period begins.

Termination consequences should also be documented.

These may include:

• Outstanding payments.
• Return of confidential information.
• Completion of pending orders.
• Return of property.
• Transition assistance.
• Continuing intellectual property restrictions.

Termination should not leave unresolved operational matters that are foreseeable when the agreement is drafted.

Dispute Resolution Between Companies

The parties should consider how future contractual disputes will be resolved.

The appropriate mechanism depends on the transaction, jurisdictions involved, and commercial requirements.

The agreement may address:

• Governing law.
• Competent courts.
• Arbitration, where appropriate.
• Contractual escalation procedures.
• Negotiation before formal proceedings.

For example, an agreement between a UAE company and a foreign corporation may involve cross-border assets and performance.

The parties should consider the practical implications of their selected dispute mechanism before signing.

Using a clause copied from another contract may create an inconvenient or expensive forum that does not correspond to the transaction.

Any dispute provision must also respect mandatory jurisdictional requirements applicable to the matter.

A Practical Example: Contract Signed by the Wrong Group Company

Consider an international business group negotiating a substantial UAE service contract.

All negotiations are conducted by employees of the group’s regional parent company.

However, the final agreement is signed by a newly established UAE subsidiary.

The supplier performs the services and later invoices the subsidiary.

The subsidiary does not have sufficient funds to pay.

The supplier demands payment from the parent company, arguing that the parent negotiated the transaction and benefited from the work.

The parent responds that it never became a contractual party and did not provide a guarantee.

A more carefully structured agreement could have identified the intended customer from the beginning.

If the parties required the parent company to assume financial responsibility, an appropriate guarantee or direct contractual obligation could have been documented.

The example demonstrates why companies should not rely on corporate-group relationships as a substitute for identifying the legal party responsible for performance.

Documents Required to Draft an Agreement Between Two Companies

The documents required depend on the transaction.

Relevant materials may include:

• Trade licences.
• Corporate registration documents.
• Memoranda or Articles of Association where relevant.
• Signing-authority documents.
• Commercial proposals.
• Quotations.
• Term sheets.
• Product or service specifications.
• Pricing schedules.
• Existing framework agreements.
• Regulatory approvals.
• Intellectual property information.
• Confidentiality agreements.
• Insurance or security documentation.
• Relevant correspondence recording negotiated terms.

Where several group companies are involved, the role of each entity should be identified before drafting begins.

The final agreement should reflect the actual transaction and the companies that will perform and receive the contractual obligations.

Agreement Drafting Assistance from Abdulrahman Alshaali Advocates & Legal Consultants

An agreement between companies should identify the responsible corporate entities and establish the legal and commercial framework governing their relationship.

Abdulrahman Alshaali Advocates & Legal Consultants assists UAE and international companies with preparing and reviewing business-to-business agreements.

Our services may include examining the proposed transaction, verifying contractual structures, developing payment and performance provisions, addressing confidentiality and intellectual property, and reviewing termination and dispute arrangements.

Where the relationship involves broader commercial cooperation, a draft business contract may also be relevant.

For general assistance with contractual preparation and review, clients can explore our contract drafting services.

We assist businesses in developing agreements appropriate to their transactions and the applicable UAE legal framework.

Explore Our Contract Drafting Services

Our contract drafting services cover commercial, corporate, investment, employment, property, financing, services, confidentiality, personal, and dispute-related agreements.

General Contract Preparation

contract drafting: Explore legal assistance with preparing, reviewing, and negotiating agreements under UAE law.

contract writing: Develop contractual language that accurately expresses the parties’ agreed rights and obligations.

draft contract: Prepare an agreement from initial instructions through to the final contractual document.

contract drafting lawyer: Obtain legal assistance with contractual preparation, review, and negotiation.

draft contract between two parties: Establish contractual responsibilities and obligations between two parties.

Employment and Workplace Agreements

draft employment contract: Prepare employment contracts reflecting applicable UAE labour requirements.

Draft Employment Agreement: Document employment-related arrangements and supplementary contractual conditions.

Non-Compete Agreement Draft: Address restrictions on competitive activity within applicable legal limits.

Property and Rental Agreements

draft tenancy agreement: Prepare residential tenancy agreements addressing landlord and tenant responsibilities.

draft lease agreement: Establish commercial property leasing arrangements and relevant operational obligations.

draft rental agreement: Document rental payments, security deposits, property handover, and related financial conditions.

Corporate and Investment Agreements

draft partnership agreement: Establish partners’ contributions, management responsibilities, and financial arrangements.

draft operating agreement: Prepare internal management documentation appropriate to a company’s legal structure.

Draft Shareholders Agreement: Define shareholder rights, governance arrangements, ownership transfers, and exit provisions.

Draft Investment Agreement: Document investment commitments, funding conditions, and investor rights.

Draft Joint Venture Agreement: Establish the contributions and responsibilities of businesses undertaking a collaborative project.

Commercial and Financial Agreements

draft business contract: Prepare agreements governing commercial transactions and ongoing business relationships.

Draft Sales Agreement: Establish contractual terms concerning the sale of goods or other assets.

Draft Supply Agreement: Define product specifications, quantities, delivery arrangements, and payment obligations.

draft loan agreement: Document financing arrangements, repayment conditions, and relevant security provisions.

Franchise Agreement Draft: Establish contractual provisions governing franchise operations, fees, and intellectual property.

Services and Confidentiality Agreements

draft consulting services agreement: Establish consultancy deliverables, professional responsibilities, and agreed fees.

Draft Service Agreement: Define service requirements, performance standards, and payment arrangements.

draft nda agreement: Identify confidential information and establish restrictions on its unauthorised disclosure or use.

Draft Confidentiality Agreement: Prepare confidentiality obligations for commercial negotiations and professional relationships.

Personal and Dispute-Related Agreements

Prenuptial Agreement Draft: Document legally appropriate financial arrangements before marriage under the applicable personal status framework.

Draft Settlement Agreement: Record negotiated resolutions, agreed obligations, and settlement conditions.

Each agreement should be prepared according to the companies involved, the transaction, and the applicable UAE legal framework.

Request Assistance with Your Draft Agreement Between Two Companies

Whether you are establishing a supplier relationship, outsourcing business functions, entering a strategic commercial arrangement, or documenting an existing relationship between two companies, the agreement should clearly identify the responsible entities and their respective obligations.

Abdulrahman Alshaali Advocates & Legal Consultants assists UAE and international businesses with preparing and reviewing company-to-company agreements.

Contact our team to discuss your commercial arrangement and contractual requirements.

---

Frequently Asked Questions

Can Two Companies Start Doing Business Before the Final Agreement Is Signed?

Companies may begin commercial dealings before executing a detailed agreement, but doing so can create uncertainty concerning which terms govern the relationship.

Purchase orders, quotations, emails, invoices, and conduct may become relevant to determining the parties’ obligations.

Where important commercial risks exist, the principal terms should be documented before substantial performance or payment begins.

Can One Company Sign an Agreement on Behalf of Another Company in the Same Group?

Not automatically.

Separate companies generally have separate legal personalities, and one group company should not be assumed to have authority to bind another.

Appropriate authority, agency, or corporate documentation should be established where one entity is intended to act on behalf of another.

Can Different Agreements Apply to Different Orders Between the Same Companies?

Yes. Businesses may use a master agreement with individual purchase orders or statements of work.

The documents should establish their contractual hierarchy and identify which terms govern if inconsistencies arise.

Without a clear hierarchy, competing provisions in quotations, purchase orders, or other documents may create disputes.

Can an Agreement Between Two UAE Companies Be Signed Electronically?

Commercial contracts may be concluded through modern technological means, subject to the applicable legal requirements.

The parties should ensure that the execution method is appropriate for the particular contract and that any transaction requiring additional formalities, authentication, or registration follows those requirements separately.

---

Sources

Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law.

UAE Legislation Platform – Official Legislation (UAE Legislation)

Federal Decree-Law No. 50 of 2022 Promulgating the Commercial Transactions Law.

UAE Legislation Platform – Official Legislation (UAE Legislation)