1. Introduction

Negotiation liability concerns legal responsibility arising from conduct during the period before a final contract is concluded. It is commonly associated with the civil-law concept of culpa in contrahendo—fault in contracting.

The UAE position has undergone a major change.

Under the former 1985 Civil Transactions Law, there was no dedicated statutory regime governing liability for bad-faith negotiations. Courts generally approached pre-contractual misconduct through broader doctrines such as unlawful acts, fraud, misrepresentation and abuse of rights.

The position changed substantially on 1 June 2026, when Federal Decree-Law No. 25 of 2025 promulgating the new Civil Transactions Law came into force. Articles 121–123 expressly regulate pre-contractual negotiations, good faith, disclosure and confidentiality.

The central rule is now:

Parties are free not to conclude a contract, but the manner in which they negotiate and terminate negotiations must comply with good faith.

2. Meaning of Negotiation Liability

Negotiation liability arises when a party causes legally compensable harm through improper conduct during negotiations.

Typical situations include:

• entering negotiations without a genuine intention to contract;
• deliberately misleading the other party;
• concealing material information;
• inducing substantial reliance and then acting in bad faith;
• misusing confidential information;
• terminating negotiations dishonestly;
• manipulating negotiations for an ulterior commercial purpose.

The doctrine therefore protects the integrity of the negotiation process, without forcing parties to enter contracts they do not want.

3. The New UAE Legal Framework

Article 121 — Good Faith in Negotiations

Article 121 provides four particularly important rules:

Rule 1 — Negotiations must be conducted in good faith

The initiation, conduct and termination of pre-contractual negotiations must comply with good faith.

Rule 2 — Negotiations do not create an obligation to contract

Simply negotiating does not mean that the parties must ultimately sign an agreement.

Rule 3 — Bad-faith negotiation can create liability

A party that negotiates or terminates negotiations in bad faith is liable for the actual damage suffered by the other party.

Importantly, compensation does not ordinarily include:

• expected benefits from the contract that was never concluded; or
• lost opportunities to obtain those benefits,

unless the parties have agreed otherwise.

Rule 4 — Deliberate material non-disclosure is bad faith

Deliberately failing to disclose material information affecting the validity of the proposed contract is expressly treated as bad faith.

4. Article 122 — Duty of Disclosure

Article 122 supplements Article 121.

A party who possesses information of decisive importance to the other party's consent must disclose it where:

• the other party's ignorance is presumed; or
• the other party has placed trust in the negotiating party.

Information directly and necessarily connected with:

• the contract's content; or
• the status of the parties

can qualify as essential information.

The parties must exercise due care in providing relevant information and data concerning the negotiations and proposed contract.

The provision also establishes an important evidentiary rule:

The party alleging non-disclosure must prove that the information should have been disclosed, while the other party must prove that it made the disclosure.

5. Article 123 — Confidential Information

Negotiations frequently involve commercially sensitive information.

Examples:

• business plans;
• financial statements;
• customer lists;
• technical designs;
• source code;
• pricing;
• acquisition plans;
• intellectual property;
• trade secrets.

The new Civil Transactions Law separately regulates unauthorised use or disclosure of confidential information obtained during negotiations.

Thus, negotiations now potentially generate three related responsibilities:

Good faith + disclosure + confidentiality

6. The Most Important Principle: No Duty to Conclude

The new law deliberately balances protection and freedom.

Article 121 does not say:

“Once negotiations become serious, the parties must sign.”

Instead:

Negotiation itself does not create an obligation to conclude the contract.

Therefore, a party may normally decide:

• the price is too high;
• financing is unavailable;
• commercial conditions changed;
• another opportunity became preferable;
• internal approval was refused;
• the transaction no longer makes business sense.

The legal problem arises when the manner of withdrawal becomes bad faith.

7. Withdrawal Is Not Automatically Wrongful

This distinction is crucial.

Lawful withdrawal

A party says:

“After completing due diligence, our board has decided not to proceed.”

There may be no liability simply because negotiations end.

Potentially wrongful withdrawal

A party secretly decides from the beginning not to contract, but spends months encouraging the other side to incur substantial expenditure solely to obtain confidential information.

That conduct may raise a bad-faith negotiation claim.

The difference is therefore:

Freedom to withdraw + requirement of good faith.

8. Negotiation Liability vs Contractual Liability

These are different.

9. Negotiation Liability vs Tort Liability

Under the former UAE regime, pre-contractual misconduct was often analysed through the general law of unlawful acts/tort.

The Dubai Court of Cassation's Civil Appeal No. 267/2016 is particularly important. The court treated negotiations as a factual/material act that did not itself create a contractual obligation, while recognising that fault associated with withdrawal could potentially produce tortious liability.

The 2026 law changes the landscape by expressly creating a statutory negotiation regime.

Thus:

Old framework:
Negotiation misconduct → potentially tort/unlawful act

Current framework:
Negotiation misconduct → Article 121 good-faith liability, alongside other potentially applicable doctrines.

10. Reliance Loss

A central concept is reliance loss.

Suppose A induces B to believe that negotiations are genuinely progressing.

B spends:

• AED 200,000 on due diligence;
• AED 100,000 on consultants;
• AED 50,000 on technical studies.

The contract is never concluded.

If A acted in bad faith and the statutory requirements are established, these types of actual losses are potentially more closely connected to Article 121 than the profits B expected from the unrealised contract.

11. Expectation Loss

Expectation loss means the profit or economic benefit that the claimant expected to receive if the contract had been concluded.

Example:

A and B negotiate a five-year supply contract.

B expected AED 10 million in profit.

A withdraws in bad faith.

Under Article 121, compensation does not ordinarily include the expected benefits from the contract that was never concluded, nor lost opportunities to obtain those benefits, unless otherwise agreed.

This is a major limitation.

12. Why the Distinction Matters

Suppose:

Actual negotiation expenses: AED 300,000
Expected future profit: AED 5 million

The claimant cannot simply demand AED 5.3 million.

The court must distinguish:

Loss caused by the wrongful negotiation conduct

from

Profit that would have resulted from a contract that never existed.

13. Bad-Faith Negotiation

Bad faith is not defined merely as:

“The parties failed to reach agreement.”

Possible indicators include:

1. No genuine intention to contract

A party enters negotiations merely to extract information.

2. Deliberate deception

False information is knowingly supplied.

3. Deliberate concealment

Material information is intentionally withheld.

4. Strategic manipulation

Negotiations are prolonged for an improper purpose.

5. Improper termination

Negotiations are ended in circumstances amounting to bad faith.

6. Misuse of confidential information

Information obtained during negotiations is exploited without permission.

The new law expressly identifies deliberate failure to disclose material information affecting contractual validity as bad faith.

14. Good Faith Does Not Mean Altruism

This is an important commercial point.

Good faith does not necessarily require a party to:

• accept an unattractive price;
• sacrifice its commercial interests;
• reveal every confidential business strategy;
• accept the other side's preferred terms;
• continue negotiations indefinitely.

A party can negotiate aggressively while still acting lawfully.

The legal question is:

Was the conduct inconsistent with the statutory requirements of good faith?

15. Material Information

Not every piece of information must be disclosed.

Article 122 focuses on information of decisive importance to the other party's consent.

Relevant factors include:

• whether the information directly concerns the contract;
• whether it concerns the status of the parties;
• whether the other party is presumed to be unaware;
• whether trust was placed in the negotiating party;
• whether the information would materially affect consent.

This prevents the disclosure obligation from becoming an unlimited obligation to reveal every commercial fact.

16. Example — Sale of a Business

A seller negotiates to sell a company.

The seller knows that:

• a major licence is about to expire;
• the buyer is unaware;
• the licence is essential to the business;
• the buyer's decision depends on the continued licence.

The seller deliberately conceals the information.

This can potentially engage:

• Article 121 bad faith;
• Article 122 disclosure;
• misrepresentation rules;
• contractual invalidity/annulment if a contract was actually concluded.

The precise remedy depends on the applicable facts and statutory requirements.

17. Example — Acquisition Negotiations

Company A negotiates to acquire Company B.

A requests:

• financial records;
• customer lists;
• technology documents;
• pricing information.

A never genuinely intends to acquire B and uses the negotiations solely to obtain B's confidential information.

A then uses that information to compete against B.

Potential issues include:

• bad-faith negotiation;
• misuse of confidential information;
• unlawful conduct;
• damages;
• confidentiality obligations.

18. Example — Good-Faith Withdrawal

Company A and Company B negotiate a joint venture.

They exchange draft agreements.

Before signing, A discovers that regulatory approval will not be obtained.

A honestly informs B and terminates negotiations.

B has spent AED 100,000 on due diligence.

The mere fact that B incurred costs does not automatically establish liability.

The critical question is whether A:

• acted in good faith;
• had a legitimate reason for withdrawal;
• complied with disclosure obligations;
• caused actual damage through bad-faith conduct.

19. Case Law 1 — Dubai Court of Cassation, Civil Appeal No. 267/2016

This is the most directly relevant historical UAE case on negotiation liability.

The case concerned negotiations relating to a proposed lease.

The parties had exchanged drafts but had not concluded a final lease.

The court treated the negotiations themselves as a material/factual act rather than a completed contract.

However, the court recognised that fault connected with the manner of terminating negotiations could create liability under the law of unlawful acts. The case involved expenditure including an advance payment and commission.

Principle

Negotiations do not themselves create a contract, but wrongful conduct during negotiations can produce liability.

Importance today

This case represents the pre-2026 position.

It should not be treated as the complete current rule because Article 121 now expressly regulates negotiation conduct.

20. Case Law 2 — Access Group DWC LLC & Proex Partners Ltd v BLS International FZE [2023] DIFC CFI 091

This case is particularly useful because it demonstrates the limits of the old UAE Civil Code Article 246 good-faith rule.

The DIFC Court was dealing with UAE Civil Code principles and specifically considered whether good faith could impose duties during negotiations.

The Court concluded that Article 246 concerned contractual performance and did not itself impose a general pre-contractual duty in negotiations under the former Civil Code. It held there was no duty requiring BLS to favour the claimants or disclose that it was negotiating with others.

Importance

This case demonstrates exactly why the 2026 reform matters.

Before 1 June 2026:

Article 246 → principally contractual performance

After 1 June 2026:

Article 121 → expressly regulates negotiations.

Qualification

This is a DIFC case applying former UAE Civil Code principles, not a mainland UAE precedent.

21. Case Law 3 — Hexagon Holdings v DIFC Authority [2019] DIFC CFI 013

This case concerned a joint-venture arrangement containing obligations to use best endeavours in good faith.

The DIFC Court considered whether such an obligation could require parties to reach agreement on matters that remained unresolved.

The Court held that an obligation to negotiate is generally difficult to enforce where it amounts merely to an agreement to agree, especially where there is no objective standard by which a court can determine what agreement should have been reached.

Principle

A duty to negotiate does not automatically mean a duty to reach an agreement.

Importance

This principle remains useful when distinguishing:

• obligation to negotiate;
• obligation to cooperate;
• obligation to conclude;
• obligation to achieve a contractual result.

Qualification

This is DIFC jurisprudence, and the case predates Article 121.

22. Case Law 4 — Taaleem PJSC v National Bonds Corporation & Deyaar [2010] DIFC CFI 014

This dispute concerned negotiations surrounding a proposed property transaction and whether the parties had reached a binding agreement.

The court examined:

• offer;
• acceptance;
• continuing negotiations;
• preliminary agreements;
• intention to create legal relations.

It applied the DIFC contractual framework and considered provisions dealing with negotiations and formation.

Principle

The existence of negotiations does not by itself answer whether a binding contract has been concluded.

The court must determine objectively what the parties agreed and whether essential matters remained unresolved.

Relevance

This is important because negotiation liability often begins with a threshold question:

Was there actually a contract already?

If there was, the dispute may be contractual rather than purely pre-contractual.

23. Case Law 5 — Deyaar Development PJSC v Taaleem PJSC & National Bonds [2015] DIFC CA 010

The Court of Appeal considered the evidence arising from communications and negotiations surrounding the transaction.

The case demonstrates the importance of examining:

• correspondence;
• conversations;
• conduct;
• intention;
• contractual documents.

The court discussed the circumstances in which negotiations and communications can help establish what contractual obligations were actually agreed.

Principle

Negotiation evidence can be critical to determining whether and when contractual obligations arose.

Relevance

Negotiation liability and contract formation frequently overlap.

24. Case Law 6 — John Vitalo v Atlas Mara Management Services Ltd [2018] DIFC CFI 018

This case concerned alleged terms said to have been agreed during pre-contractual discussions.

The Court considered whether preliminary negotiations could be relied upon to establish contractual rights.

An entire-agreement clause was particularly significant, and the court concluded that the contractual provision prevented reliance upon earlier discussions for the relevant purpose.

Principle

Pre-contractual negotiations do not automatically become contractual promises.

Importance

This illustrates the difference between:

• negotiation evidence;
• contractual terms;
• representations;
• warranties;
• entire-agreement provisions.

25. Case Law 7 — Sam Precious Metals v Snyder Prime [2023] DIFC CFI 030

This case involved a memorandum of understanding and competing arguments about obligations arising from earlier negotiations.

The court considered how preliminary negotiations could be used in interpreting the parties' eventual written arrangements under the DIFC Contract Law.

Principle

Pre-contractual discussions can have evidentiary significance, but their legal effect depends upon the applicable contractual and statutory framework.

Relevance

This is useful in disputes involving:

• MOUs;
• term sheets;
• heads of agreement;
• preliminary undertakings;
• investment negotiations.

26. Case Law 8 — Mr Nancy v Narcissa [2023] DIFC CFI 098

The DIFC Court considered whether transactions and conduct occurring during negotiations could demonstrate an intention to create legal relations.

The Court observed that where parties have actually performed the transaction, this can strongly affect the analysis of whether a binding contractual relationship exists and whether previously unresolved matters were essential.

Principle

Conduct during and after negotiations can help establish whether the parties actually entered a contractual relationship.

This is important because sometimes a dispute described as “negotiation liability” is actually a dispute about whether a contract already came into existence.

27. Case-Law Revision Table

Important: Except for the Dubai Court of Cassation decision, these are DIFC authorities and should be treated as comparative UAE jurisprudence rather than binding mainland UAE precedent.

28. The Major 2026 Change

The difference can be expressed simply:

Former UAE framework

Negotiations

↓

No general statutory obligation to conclude

↓

Withdrawal generally permitted

↓

Bad conduct potentially addressed through:

• tort/unlawful act;
• fraud;
• misrepresentation;
• abuse of rights;
• other doctrines.

This is reflected in the historical approach in Dubai Cassation 267/2016 and the analysis in Access Group v BLS.

Current framework

Negotiations

↓

Article 121 good-faith requirement

↓

Article 122 disclosure duty

↓

Article 123 confidentiality protection

↓

Bad-faith negotiation/termination

↓

Actual-damage compensation

The new framework is expressly codified.

29. What Conduct May Create Liability?

Potential examples include:

A. Sham negotiations

Starting negotiations with no genuine intention of reaching an agreement.

B. Deliberate concealment

Knowingly withholding decisive information.

C. Misleading statements

Providing materially false information.

D. Confidentiality abuse

Using information obtained during negotiations for an unauthorised purpose.

E. Bad-faith termination

Ending negotiations in circumstances that constitute bad faith and cause actual damage.

F. Manipulative negotiation

Using negotiations primarily to obtain an improper advantage.

The exact boundaries of these categories will increasingly be developed by UAE courts under the new legislation.

30. What Conduct Does Not Automatically Create Liability?

The following should not automatically be treated as negotiation liability:

• rejecting an offer;
• demanding a lower price;
• changing one's commercial position;
• conducting negotiations with several potential counterparties;
• deciding that the transaction is no longer commercially attractive;
• requesting additional due diligence;
• terminating negotiations honestly;
• refusing to accept the other party's terms.

Article 121 specifically preserves the freedom not to conclude the contract.

31. Negotiating With Multiple Parties

Suppose Company A negotiates simultaneously with:

• Company B;
• Company C;
• Company D.

A eventually contracts with C.

The fact that B spent money negotiating with A does not automatically establish liability.

The important questions are:

• Did A disclose what it was required to disclose?
• Did A make false representations?
• Did A deliberately induce B's reliance?
• Did A misuse B's confidential information?
• Did A terminate B's negotiations in bad faith?
• What actual damage did B suffer?

32. Letters of Intent and MOUs

Letters of intent are particularly important.

A document may state:

“The parties intend to negotiate toward a definitive agreement.”

That does not necessarily create a binding obligation to complete the transaction.

But another document may contain binding provisions concerning:

• confidentiality;
• exclusivity;
• costs;
• dispute resolution;
• disclosure;
• governing law;
• break fees.

Therefore, courts should examine the legal effect of each clause, rather than treating the entire document as either completely binding or completely non-binding.

33. Exclusivity Agreements

An exclusivity agreement can change the analysis.

Suppose A agrees:

“For 90 days, I will negotiate exclusively with B.”

A then secretly negotiates with C.

That may involve a breach of an existing contractual obligation rather than merely pre-contractual negotiation liability.

This distinction is important:

Negotiations may be pre-contractual, but an agreement governing the negotiations can itself be legally binding.

34. Confidentiality Agreements

Similarly, a confidentiality agreement can create independent contractual duties.

Suppose A gives B confidential technical information during negotiations.

B subsequently uses the information to compete against A.

The claim may be based on:

• confidentiality contract;
• Article 123;
• intellectual-property rights;
• unlawful conduct;
• other applicable legislation.

The correct legal classification depends on the facts.

35. Due Diligence

Due diligence is central to negotiation liability.

A buyer may investigate:

• financial statements;
• liabilities;
• litigation;
• licences;
• employees;
• tax;
• intellectual property;
• regulatory approvals.

Article 122 makes disclosure particularly important where information is of decisive importance to consent.

Therefore:

Due diligence does not necessarily eliminate the seller's disclosure obligations.

Nor does a disclosure obligation necessarily mean that one party must disclose every piece of information it possesses.

36. Burden of Proof

Under Article 122, the statutory allocation is especially significant.

Claimant

The party alleging that information should have been disclosed must prove the alleged non-disclosure.

Other negotiating party

The other party must prove that it made the required disclosure.

This makes documentary evidence extremely important.

Useful evidence includes:

• emails;
• term sheets;
• meeting minutes;
• data-room records;
• due-diligence questionnaires;
• disclosure letters;
• WhatsApp messages;
• draft contracts;
• board resolutions;
• confidentiality agreements.

37. Negotiation Liability and Electronic Communications

Modern negotiations frequently occur through:

• email;
• WhatsApp;
• Microsoft Teams;
• electronic signatures;
• virtual meetings;
• data rooms.

The legal issue is not simply whether a message exists.

The court may need to determine:

• who sent it;
• authority;
• authenticity;
• context;
• whether it was a negotiation statement;
• whether it was a binding offer;
• whether it was merely exploratory;
• whether it constituted disclosure;
• whether it demonstrated bad faith.

38. Negotiation Liability in M&A

Mergers and acquisitions present significant risks.

Potential disputes include:

• undisclosed liabilities;
• incorrect financial information;
• concealed litigation;
• hidden regulatory problems;
• misuse of due-diligence information;
• termination after substantial reliance;
• competing-bid situations.

Article 122 is particularly significant because M&A negotiations frequently involve information that can be decisive to consent.

39. Negotiation Liability in Real Estate

Typical examples:

• developer negotiates sale;
• buyer pays preliminary amounts;
• parties exchange drafts;
• seller later sells to someone else.

The legal analysis should determine:

1. Was a binding contract concluded?
2. Was there a reservation agreement?
3. Was there an exclusivity agreement?
4. Were payments made?
5. Did either party act in bad faith?
6. What actual damage resulted?

The historical Dubai Cassation 267/2016 case is particularly useful for this type of fact pattern.

40. Negotiation Liability in Joint Ventures

Joint ventures commonly involve:

• term sheets;
• memoranda;
• shareholder agreements;
• land contributions;
• financing commitments;
• regulatory approvals.

The Hexagon Holdings litigation demonstrates the difficulty of enforcing a general promise to negotiate where essential commercial terms remain unresolved.

Under the new UAE regime, however, the court must separately consider whether negotiation conduct complied with Article 121 even if there is no obligation to conclude the eventual joint-venture agreement.

41. Remedies

Where Article 121 applies and bad-faith negotiation is established, the principal statutory remedy is compensation for actual damage.

Depending on the circumstances, other legal consequences may arise from other provisions, including:

• annulment where legally available;
• restitution;
• damages for misrepresentation;
• confidentiality remedies;
• injunctions under applicable procedural law;
• contractual remedies where a preliminary agreement was binding.

The remedy depends on the legal source of the claim.

42. No Automatic Expectation Damages

This deserves special emphasis.

Suppose:

• expected contract value = AED 20 million;
• expected profit = AED 5 million;
• actual negotiation expenditure = AED 300,000.

Article 121 does not ordinarily allow the claimant simply to claim the AED 5 million expected profit from the contract that never came into existence.

The statute expressly excludes expected benefits and associated lost opportunities, unless otherwise agreed.

This reflects an important conceptual distinction:

Negotiation liability compensates wrongful negotiation damage; it does not automatically create the contract that the parties failed to conclude.

43. Negotiation Liability and Moral Damage

A separate question may arise concerning non-economic harm.

Whether moral damages are available will depend on the applicable provisions and factual circumstances.

The claimant should not simply assert:

“The negotiation caused disappointment, therefore I deserve moral damages.”

The court must identify a legally recognised form of damage and an applicable basis for compensation.

44. Practical Examination Problem

Facts

Company A and Company B negotiate an AED 50 million acquisition.

A knows that its principal operating licence is likely to be cancelled.

A deliberately fails to disclose this.

B spends:

• AED 400,000 on legal due diligence;
• AED 200,000 on financial advisers;
• AED 100,000 on technical investigation.

B later discovers the licence problem and refuses to proceed.

Analysis

Issue 1 — Negotiations

No final acquisition contract was concluded.

Issue 2 — Article 121

Negotiations must comply with good faith.

Issue 3 — Article 122

The licence information may constitute decisive information affecting B's consent.

Issue 4 — Bad faith

Deliberate concealment of material information is expressly treated as bad faith.

Issue 5 — Damage

B's actual expenditure may potentially constitute actual damage, subject to proof and causation.

Issue 6 — Expectation loss

B generally cannot claim the profit it expected from the uncompleted acquisition merely because negotiations failed.

Issue 7 — Evidence

B should establish:

• what A knew;
• why the information was decisive;
• whether A deliberately withheld it;
• what B spent;
• causal connection between A's conduct and B's loss.

45. Practical Legal Test

For any UAE negotiation-liability problem, use:

N-G-D-C-L-R

N — Negotiations
Did the parties actually enter negotiations?

G — Good faith
Was the conduct consistent with Article 121?

D — Disclosure
Was decisive information properly disclosed under Article 122?

C — Confidentiality
Was negotiation information properly protected under Article 123?

L — Loss
What actual damage occurred?

R — Remedy
What compensation or other legal remedy is available?

46. Seven Questions Every Lawyer Should Ask

1. Was there a concluded contract?
2. If not, were there binding preliminary agreements?
3. What did each party know?
4. What information should have been disclosed?
5. Was the conduct undertaken in good faith?
6. What actual damage resulted?
7. Is the claimant seeking reliance loss or prohibited expectation loss?

These questions capture most negotiation-liability disputes.

47. Old Law vs New Law

The current regime therefore represents a significant statutory development.

48. Important Caution About Case Law

Because the Article 121–123 regime only became effective on 1 June 2026, there is understandably limited reported judicial interpretation of these provisions as of September 2026.

Accordingly:

• Dubai Cassation 267/2016 explains the historical UAE approach;
• Access Group v BLS demonstrates the limits of former Article 246;
• Hexagon, Taaleem, Deyaar, John Vitalo, Sam Precious Metals and Mr Nancy provide useful DIFC/comparative guidance concerning negotiation, formation and preliminary agreements;
• future mainland UAE judgments will be particularly important in defining the precise meaning of “bad faith,” “actual damage,” “decisive information,” and “termination in bad faith.”

This distinction is important because DIFC courts apply their own statutory framework and their decisions are not automatically binding on mainland UAE courts.

49. Quick Revision Notes

Negotiation Liability

Pre-contractual conduct + bad faith + actual damage = potential liability

Article 121

Remember:

Good Faith + Freedom Not to Contract + Actual Damage

Article 122

Remember:

Decisive Information + Disclosure + Due Care

Article 123

Remember:

Confidential Information + No Unauthorised Use/Disclosure

Damages

Remember:

Actual loss ≠ expected profit from a contract that never existed

50. Conclusion

The UAE's negotiation liability doctrine has fundamentally changed with the new Civil Transactions Law effective 1 June 2026.

The law now expressly regulates the pre-contractual stage. Parties must conduct the initiation, continuation and termination of negotiations in good faith, while remaining free ultimately to decide not to contract. Bad-faith negotiation or termination can lead to compensation for actual damage, while Article 122 creates a specific duty concerning decisive information and Article 123 addresses confidential information obtained during the negotiation process.

The historical Dubai Court of Cassation Civil Appeal No. 267/2016 remains particularly important because it shows how UAE courts previously dealt with failed negotiations: negotiations did not themselves create a contractual obligation, but wrongful conduct could potentially create tortious liability.

The subsequent DIFC authorities—including Access Group v BLS, Hexagon Holdings, Taaleem, Deyaar, John Vitalo, Sam Precious Metals, and Mr Nancy—help explain the distinctions between negotiation, good faith, preliminary agreements, contract formation and enforceability.

One-line exam answer:

Under the UAE's current Civil Transactions Law, negotiation does not oblige parties to conclude a contract, but the initiation, conduct and termination of negotiations must comply with good faith; bad-faith negotiation, deliberate concealment of decisive information, or misuse of confidential information can generate pre-contractual liability and appropriate legal remedies.