Draft Contract Between Two Parties in the UAE
A contract between two parties establishes the rights, obligations, and expectations governing their relationship. The parties may be individuals, companies, professionals, investors, suppliers, or other legal persons entering into a commercial or private arrangement.
The agreement should explain what each party is required to do, what each party will receive in return, when those obligations must be performed, and what happens if the arrangement does not proceed as expected.
A short agreement may be sufficient for a straightforward transaction, while a relationship involving substantial payments, continuing obligations, valuable assets, or long-term cooperation may require more detailed contractual provisions.
Abdulrahman Alshaali Advocates & Legal Consultants assists businesses and individuals with preparing and reviewing agreements between two parties under UAE law.
Contracts Between Two Parties Under UAE Law
Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law provides the general legal framework governing civil contractual relationships in the UAE.
The law addresses matters including contract formation, consent, contractual obligations, performance, interpretation, and the legal consequences of non-performance.
A contract should therefore reflect a genuine agreement between the parties and comply with any mandatory legal requirements applicable to the transaction.
The general contractual framework may be supplemented by specialised legislation.
For example, an employment agreement must take account of UAE employment legislation, while an agreement involving a company may require consideration of the Commercial Companies Law.
Property, financing, intellectual property, and other specialised transactions may also be subject to additional legal requirements.
The drafting process should therefore begin by identifying the nature of the relationship rather than assuming that every two-party agreement can use the same standard form.
Identifying the Two Contracting Parties Correctly
The agreement should clearly identify the persons or entities assuming contractual obligations.
For an individual, relevant information may include the person’s full legal name and appropriate identification details.
For a company, the agreement should use the entity’s correct registered name rather than relying solely on a trading name or brand.
This distinction can become important when several companies within the same corporate group use similar names.
For example, negotiations may be conducted with employees of one company while the final agreement names another group entity.
The parties should establish which legal entity is actually responsible for performing the contractual obligations and making or receiving payment.
Where a person signs on behalf of a company, the relevant authority should also be considered.
The agreement should not assume that every employee, manager, representative, or shareholder automatically has unrestricted authority to bind the company.
Defining the Purpose of the Agreement
The contract should identify the relationship the parties intend to establish.
This may involve:
- The sale or purchase of goods.
- The provision of services.
- A commercial collaboration.
- The use or rental of an asset.
- A loan or other financial arrangement.
- Confidentiality obligations.
- A settlement of an existing disagreement.
- Another clearly defined transaction.
The purpose should be stated accurately because it provides context for the detailed obligations that follow.
For example, two companies may agree to cooperate on a specific project.
A general statement that they will “work together” does not establish who will provide staff, who will bear project expenses, or how revenue will be handled.
The contract should convert the parties’ commercial understanding into identifiable obligations.
Where the relationship is more specialised, another agreement within our contract drafting services may provide a more appropriate structure.
Establishing What Each Party Must Do
A two-party agreement should identify the obligations of both sides separately.
This helps avoid contracts that describe the transaction generally without establishing who is responsible for each action.
For example, Party A may be required to provide specified equipment by a particular date.
Party B may be required to pay the agreed price after delivery and inspection.
If installation is also required, the agreement should establish whether that obligation belongs to Party A or Party B.
The contract may also identify supporting responsibilities.
These can include providing documents, obtaining approvals, giving access to premises, or responding to requests within specified periods.
Where one party’s performance depends on cooperation from the other, the relationship between those obligations should be explained.
A clear allocation of responsibility makes it easier to determine whether a contractual requirement has been performed.
Drafting Payment and Financial Terms
Where one party must pay the other, the agreement should explain how the amount is determined and when it becomes payable.
The payment may consist of:
- A fixed amount.
- Instalments.
- Hourly or daily fees.
- Payments linked to milestones.
- Recurring monthly charges.
- A pricing formula based on quantities or usage.
The agreement should also establish the currency, invoicing requirements, and any conditions affecting payment.
For example, Party B may be required to pay AED 100,000 in three instalments.
The contract should specify the amount and due date of each instalment rather than stating only that payment will be made “in stages.”
Where a payment depends on delivery, completion, or acceptance, the triggering event should be identified.
The parties should also consider the treatment of applicable taxes, approved expenses, and other transaction-related charges.
Setting Deadlines and Performance Milestones
Timing can be a central part of a contract.
A party may require goods before an event, a report before a financing decision, or services within an agreed project period.
The agreement should identify important dates and explain what must occur by each deadline.
For continuing arrangements, the parties may use milestones rather than one final completion date.
For example, a project may involve an initial report, implementation work, and final delivery.
Each stage may have separate deadlines and payment consequences.
The agreement should also consider what happens when performance depends on an action by the other party.
If Party A cannot complete the work until Party B supplies necessary information, the contract should address the effect of delayed information on the timetable.
This can reduce disagreements about responsibility for missed deadlines.
Establishing Approval and Acceptance Procedures
Some contractual obligations require the receiving party to review and approve work before it is considered complete.
An acceptance procedure can establish objective steps for this process.
For example, Party A may submit a design to Party B for approval.
The agreement can identify:
- How the design must be submitted.
- How long Party B has to review it.
- How comments must be communicated.
- Whether revisions are included in the agreed price.
- What happens if Party B does not respond.
Acceptance provisions should not create indefinite uncertainty.
A party should understand when its work will be regarded as completed and when any related payment becomes due.
Where technical standards or specifications apply, those requirements should be identified in the agreement or clearly incorporated documents.
Handling Changes After the Contract Is Signed
The parties may decide to change their arrangement after signing.
They may increase the quantity of goods, extend the project, alter the services, or change the price.
The contract should establish a procedure for approving amendments.
For example, the agreement may require changes to be documented and approved by authorised representatives of both parties.
This can prevent disputes arising from informal conversations.
A project employee may request additional work without having authority to increase the company’s contractual obligations.
If the other party performs that work immediately, a disagreement may later arise about payment.
A clear variation procedure can require the parties to agree on additional costs and timing before expanded work begins.
The parties should also distinguish a formal contractual amendment from routine operational instructions that do not alter the agreement.
Confidential Information Shared Between the Parties
Two-party agreements often involve the exchange of information that should not be used outside the contractual relationship.
This may include pricing, customer records, technical information, financial data, business methods, or other sensitive material.
The contract can establish confidentiality obligations concerning such information.
It should identify:
- What information is protected.
- The permitted purpose for using it.
- Who may access it.
- Relevant exceptions.
- What happens when the agreement ends.
Where confidentiality is a central part of the relationship, a separate draft nda agreement or Draft Confidentiality Agreement may be appropriate.
Confidentiality wording should also distinguish protected information from information that is already lawfully public or otherwise falls outside the agreed restrictions.
The agreement should reflect the actual information-sharing arrangements rather than imposing generic confidentiality wording unrelated to the transaction.
Ownership of Documents, Materials, and Work Product
A contract may result in the creation or transfer of valuable materials.
These may include reports, designs, software, photographs, technical drawings, databases, or other work products.
The agreement should establish the parties’ intended rights in those materials.
For example, Party A may create a customised design specifically for Party B.
The parties should determine whether Party B will own the completed design or merely receive a right to use it.
The agreement should also distinguish newly created materials from intellectual property already owned by either party before the contract began.
A consultant or service provider may use pre-existing tools or methodologies while preparing a customised deliverable.
The contract should avoid unintentionally transferring rights that the parties did not intend to transfer.
Where intellectual property is important to the transaction, specialised legislation may also require consideration.
Using Employees, Agents, or Subcontractors
Although an agreement has two principal contracting parties, other people may participate in its performance.
A company may use employees, subcontractors, logistics providers, or specialist consultants.
The contract should consider whether third-party involvement is permitted and whether approval is required.
For example, Party A may be engaged because of its specialist technical expertise.
Party B may therefore require prior approval before substantial parts of the work are subcontracted.
The agreement should also address responsibility for work performed by authorised subcontractors.
Where third parties receive confidential information, appropriate confidentiality obligations may be necessary.
The parties should not assume that the existence of a subcontractor automatically changes the identity of the party responsible under the principal agreement.
The allocation of responsibility should be stated clearly and assessed under applicable law.
Allocating Contractual Risk Between the Parties
Contracts commonly allocate specific commercial risks.
For example, the parties may need to determine who bears responsibility for damage to equipment during transportation, loss of supplied materials, or particular third-party claims.
Risk provisions should be connected to the actual transaction.
Generic clauses copied from unrelated agreements can produce unexpected consequences.
For example, a contract may contain a very broad indemnity drafted for a construction project even though the actual transaction concerns relatively limited consultancy services.
The wording may expose one party to liabilities that were never considered during negotiations.
The agreement should therefore identify the relevant risks and allocate responsibility in a manner appropriate to the transaction and applicable legal framework.
Any proposed limitation or allocation of liability must also be considered against mandatory UAE law.
Dealing with Contractual Breach
The agreement should address what happens when one party fails to perform an important obligation.
Not every breach requires the same response.
Some problems may be corrected.
For example, a service provider may submit a report containing errors that can be revised within a short period.
Other breaches may be more serious, such as complete refusal to perform or repeated non-payment.
The contract may establish notice procedures and an opportunity to remedy particular breaches where appropriate.
It should also identify circumstances in which termination or other remedies may be considered.
The availability and extent of remedies depend on the agreement and applicable law.
A contractual provision should not assume that every remedy stated in the document will necessarily apply in every factual situation.
The consequences should be drafted according to the obligations and risks involved.
Termination and the End of the Contractual Relationship
The contract should identify when it ends and how early termination may occur.
A fixed-term agreement may expire automatically on a specified date.
Another agreement may continue until the parties complete their obligations.
The contract may also permit termination upon notice or following specified breaches.
The consequences of termination should be addressed separately.
Relevant matters may include:
- Payment of outstanding amounts.
- Completion or transfer of partially finished work.
- Return of property.
- Continuing confidentiality obligations.
- Treatment of intellectual property.
- Access to systems or premises.
- Final invoices and records.
For example, Party A may terminate a service relationship before the entire project has been completed.
The contract should provide a basis for determining payment for work properly performed before termination.
This helps avoid treating termination as though it automatically eliminates every right or obligation that arose previously.
Choosing How Contractual Disputes Will Be Addressed
The parties should consider how disputes arising from the agreement will be handled.
The appropriate mechanism depends on the nature and value of the transaction.
An agreement may address the applicable law, jurisdiction, arbitration, or other dispute-resolution arrangements where legally appropriate.
The parties should consider these provisions before signing rather than waiting until a disagreement has occurred.
For example, two UAE companies may conduct business locally but use a template requiring disputes to be resolved in a foreign jurisdiction.
That clause may create additional cost and procedural complexity that neither party considered during commercial negotiations.
The dispute-resolution provisions should reflect the actual transaction and any mandatory jurisdictional requirements.
Where the arrangement involves more than one country, the enforceability and practical consequences of the selected mechanism should receive particular attention.
A Practical Example: Two Parties Relying on an Informal Agreement
Consider a UAE company engaging an independent service provider to develop specialised software.
The parties exchange emails confirming a price and estimated completion date.
Work begins without a detailed written contract.
Several months later, the company asks for additional features.
The service provider completes some of them and later requests additional payment.
The company argues that those features were included in the original price.
The parties also disagree about who owns the source code after the project ends.
A carefully prepared agreement could have identified the original scope, established a procedure for additional work, and documented the intended ownership arrangements.
It could also have established payment milestones and an acceptance procedure.
The example demonstrates why an agreement between two parties should address the practical areas in which their expectations could differ rather than recording only the most basic commercial terms.
Documents Required to Draft a Contract Between Two Parties
The information required depends on the transaction.
Relevant documents may include:
- Identification or corporate documents of both parties.
- Commercial proposals or quotations.
- Term sheets.
- Product or service specifications.
- Pricing schedules.
- Project plans and deadlines.
- Existing agreements affecting the transaction.
- Relevant licences or approvals.
- Documents establishing signing authority.
- Correspondence recording important negotiated terms.
The parties should provide the latest agreed information rather than relying on outdated drafts.
Where several proposals have been exchanged, the drafting process should establish which terms were finally accepted.
The completed contract should reflect the actual arrangement rather than requiring later correspondence to resolve fundamental commercial issues.
Contract Drafting Assistance from Abdulrahman Alshaali Advocates & Legal Consultants
An agreement between two parties should establish each party’s responsibilities while addressing the specific risks and practical requirements of their relationship.
Abdulrahman Alshaali Advocates & Legal Consultants assists businesses and individuals with preparing and reviewing contractual agreements under UAE law.
Our services may include examining proposed transactions, defining contractual obligations, developing payment and performance provisions, and reviewing termination and dispute-related clauses.
For wider assistance with contractual documentation, clients can explore our contract drafting services.
Where the transaction involves a broader commercial relationship between corporate entities, a Draft Agreement Between Two Companies may provide a more specialised structure.
We assist clients in developing agreements that reflect the intended transaction and applicable UAE legal requirements.
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Request Assistance with Drafting a Contract Between Two Parties
Whether you are entering into a commercial transaction, appointing a service provider, documenting a private arrangement, or replacing an informal understanding with a written agreement, the contract should accurately establish the responsibilities of both parties.
Abdulrahman Alshaali Advocates & Legal Consultants assists clients with preparing and reviewing contracts between two parties under UAE law.
Contact our team to discuss your proposed agreement and contractual requirements.
Frequently Asked Questions
Can Two Individuals Enter into a Contract Without Creating a Company?
Yes. A contractual relationship does not necessarily require the parties to establish a company.
Individuals may enter into agreements in their own capacity where the proposed transaction is legally permitted.
However, particular activities may require a licence, corporate structure, or regulatory approval, so the nature of the transaction should be considered separately.
Can the Two Parties Use Different Languages in the Same Contract?
A contract may be prepared in more than one language where appropriate.
If bilingual versions are used, the parties should establish how inconsistencies between the language versions will be handled.
They should also consider the language requirements that may apply before UAE courts or government authorities if the agreement later needs to be submitted in legal or administrative proceedings.
Does Every Contract Between Two Parties Need Witnesses?
Not every ordinary contract requires witnesses merely to be valid.
However, particular transactions may be subject to specific execution, authentication, notarisation, or registration requirements.
The necessary formalities depend on the type of agreement and applicable legislation.
The parties should therefore determine the requirements for their specific transaction rather than applying one execution method to every contract.
Can One Party Be Replaced After the Contract Has Been Signed?
Replacing a contracting party may require the consent of the relevant parties and appropriate documentation.
The legal issues can differ depending on whether contractual rights are being assigned, obligations are being transferred, or one party is being replaced entirely.
The parties should document the intended change rather than assuming that transferring the business relationship automatically transfers every contractual obligation.
Sources
Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law.
