A buyer that discovers a problem after completion has a shorter window and a narrower route than most SPAs suggest. This article explains how notification clauses, baskets and caps operate in practice, and what a buyer can claim outside the contract after 1 June 2026.
Can a buyer still claim on a warranty after completing a UAE acquisition?
–Yes, and the new Civil Code has widened the grounds while narrowing what a seller can exclude
Most warranty claims are lost on procedure rather than on the merits. The buyer discovers the problem, spends weeks quantifying it, and notifies the seller after the contractual window has closed or without the particulars the clause required. Where the share purchase agreement is governed by onshore UAE law and was signed on or after 1 June 2026, a second route now operates alongside the contract. Federal Decree-Law No. 25 of 2025 imposes a disclosure duty on both parties during negotiations that no clause can exclude, and breach of it allows the aggrieved party to seek annulment.
- The notification clause decides most claims. A typical SPA requires warranty claims within 18 months of completion, with longer periods for fundamental and tax warranties. The notice must state the basis and a good faith estimate of the loss.
- Disclosure defeats a warranty even where the warranty is untrue. Anything fairly disclosed in the disclosure letter or the data room qualifies the warranty it addresses, which is why the scope of that document matters more than the warranty schedule.
- The new Civil Code overrides the exclusions. Federal Decree-Law No. 25 of 2025 makes the pre-contractual disclosure duty mandatory, and any clause limiting or excluding it is void.
- The remedy under the statute is different. A warranty claim recovers damages. A breach of the statutory disclosure duty allows the buyer to request annulment of the contract itself.
- The governing law clause decides which regime applies. The new Civil Code governs onshore transactions and does not apply to an SPA governed by DIFC or ADGM law.
Who this applies to
This article is for buyers who have completed a UAE acquisition and discovered a problem, and for sellers facing a claim. It also covers in-house counsel and deal teams assessing exposure under an SPA already signed. It is written for share purchases of onshore and free zone targets, and it applies equally to private equity buyers holding escrow and to strategic buyers who paid in full at completion.
The drafting side of the same subject, including how the warranty package and the limitation architecture are negotiated before signing, is covered in our article on share purchase agreement drafting in UAE M&A. This article covers what happens when the buyer tries to use it.
The legal framework
A post-completion claim in the UAE draws on the contract, the civil law that governs it, and the limitation rules that apply to both. The principal sources are:
- Federal Decree-Law No. 25 of 2025 on Civil Transactions, in force since 1 June 2026, which replaced the 1985 Civil Code and introduced mandatory pre-contractual obligations in Articles 121 to 123
- Article 122, which requires each negotiating party to disclose information of decisive importance to the other party's consent, and voids any clause limiting that duty
- Article 340, which allows a court to reduce agreed compensation the debtor proves was excessive, and to increase it where actual loss exceeds the agreed figure
- Article 106, which applies an objective proportionality test to the exercise of contractual rights
- Federal Decree-Law No. 50 of 2022 on Commercial Transactions, which supplies the limitation period for commercial obligations
- The share purchase agreement itself, which sets the notification window, the de minimis, the basket, the cap and the escrow mechanics
The forums:
- Arbitration: the usual choice in UAE M&A, under DIAC or ICC rules, and the route most SPAs specify
- DIFC Courts: available where the parties opted in, and where the SPA is governed by DIFC law
- Onshore courts: the default where the SPA contains no arbitration clause, under the Civil Procedure Law, with a court-appointed expert deciding the quantum
What the SPA gives the buyer
The notification window
The standard structure requires warranty claims to be notified within 18 months of completion. Fundamental warranties on title and capacity carry no time limit or a much longer one. Tax warranties are frequently extended to seven years, matching the authority's assessment window.
Eighteen months is shorter than it looks. A problem in the first post-completion audit surfaces around month nine, and quantification takes a quarter. Internal approval to claim against a seller who may still be employed by the business takes longer than that.
The particulars the notice must contain
Most clauses require the notice to specify the warranty breached, the factual basis, and a good faith estimate of the loss. A holding notice that reserves rights without those particulars is the single most common defect in a warranty claim, and a seller will take the point.
De minimis, basket and cap
Individual claims below the de minimis are disregarded entirely. The remaining claims must exceed the basket before anything is payable, and where the basket is a tipping basket the buyer then recovers from the first dirham rather than only the excess. The cap limits aggregate seller liability, and is frequently a percentage of the price rather than the whole of it.
Fundamental, tax and specific indemnities fall outside all three. That is why the classification of a warranty as fundamental is worth more in a dispute than the wording of the warranty itself.
Escrow and holdback
Where part of the price is held in escrow, the release mechanics decide the commercial outcome. A buyer that notifies a claim before the release date preserves the fund. A buyer that misses it is left pursuing a seller who has already been paid, which is a materially worse position even where the claim is strong.
Why the disclosure letter is no longer a complete defence
The defence to most warranty claims is not that the warranty was true. It is that the matter was disclosed, and a disclosed matter qualifies the warranty it addresses.
That architecture depends on the parties being free to define what counts as disclosure and to exclude reliance on anything outside the agreed documents. For SPAs governed by onshore UAE law and signed on or after 1 June 2026, that freedom is now limited.
The mandatory disclosure duty
Article 122 of the new Civil Code imposes a positive duty on each negotiating party to disclose information of decisive importance to the other party's consent. The duty applies to both sides, and covers the negotiations and the practical circumstances of the transaction. It arises even where the other party is presumed ignorant of the information, or has placed trust in the counterparty.
The duty cannot be limited or excluded by contract. Any clause that purports to do so is void as a matter of law.
What that does to standard SPA wording
An entire agreement clause and a non-reliance clause remain useful. They continue to define the contractual bargain and to exclude claims based on informal representations. What they no longer do is displace the statutory duty, so a seller that withheld information of decisive importance cannot rely on them as a complete answer.
A deliberate withholding is treated as bad faith. Article 121 also creates liability for conducting negotiations in bad faith, and that liability arises even where no contract was concluded.
The remedy is annulment, not damages
This is the practical difference that matters. A warranty claim produces a damages award subject to the cap, the basket and the notification window. A claim under Article 122 allows the aggrieved party to request annulment of the contract.
Annulment is a blunt remedy and a buyer rarely wants the shares back. Its value is negotiating leverage. A seller facing a credible annulment argument alongside a capped warranty claim is in a different settlement position from one facing the warranty claim alone.
The limitation position
Two clocks matter and they are not the same. The contractual notification window is a condition of the claim, and missing it defeats the claim even where the statutory limitation period is still open.
The statutory period is separate. Claims arising from commercial obligations take the period in the Commercial Transactions Law rather than the general civil period, and the new Civil Code shortened several periods when it came into force.
The transitional rule catches existing claims. Limitation periods that had not expired on 1 June 2026 became subject to the new periods from that date. A buyer sitting on a claim under a 2024 SPA should check the position rather than assume the old period still applies.
The latent defect period doubled. The warranty against latent defects in a sale moved from six months to one year from delivery, which is one of the few changes that helps a buyer.
Common reasons a warranty claim fails
The same defects recur, and each of them is avoidable with earlier advice.
The notice was late or incomplete. A notice served inside the window but without the required particulars is treated as no notice at all under most clauses. Sellers take this point first because it disposes of the claim without any argument about the facts.
The matter was in the data room. General disclosure of the data room contents, where the SPA permits it, means anything a reasonable buyer would have found qualifies the warranties. A buyer that did not review a folder is still taken to have seen it.
The loss is the wrong measure. The recoverable loss is the diminution in the value of the shares, not the cost of fixing the problem inside the target. Those figures differ, sometimes by a multiple, and a claim quantified on the wrong basis invites a reduction.
The buyer knew before completion. Where the SPA excludes claims for matters within the buyer's actual knowledge at signing, a due diligence report identifying the issue defeats the warranty. Our article on due diligence in UAE M&A transactions covers what a buyer is treated as having found.
The claim is against a seller with nothing left. A selling shareholder who has distributed the proceeds is a poor defendant. This is why the escrow release date is frequently more important than the notification deadline.
The exercise of the right was disproportionate. Article 106 of the new Civil Code applies an objective proportionality test to the exercise of contractual rights. A seller relying on a trivial notice defect to defeat a substantial claim, or a buyer inflating a claim to trigger a threshold, both operate within that provision.
Why the governing law clause decides the outcome
The new Civil Code applies to onshore UAE civil transactions. It does not apply to a contract expressly governed by DIFC or ADGM law, because those are separate common law jurisdictions with their own contract frameworks.
For an SPA, that produces two quite different positions. Under onshore UAE law, the mandatory disclosure duty and the court's power to adjust agreed compensation under Article 340 operate regardless of what the parties agreed. Under DIFC law, the contractual allocation of risk stands largely as drafted, which is what most international deal teams expect.
The choice is made at signing and cannot be revisited afterwards. The wider considerations are covered in our article on English law clauses in UAE contracts after the DIFC reforms. The seat and institution decision is covered in our guide to choosing a UAE arbitration clause.
What a buyer should do in the first 30 days
- Find the notification clause before anything else. Diarise the deadline from completion, not from discovery, and identify exactly what the notice must contain.
- Check the escrow release date. Where a fund is still held, a claim notified before release preserves it. That date is frequently earlier than the warranty deadline.
- Preserve the data room in its completion state. Whether a matter was disclosed turns on what the room contained and when. Access is frequently withdrawn shortly after completion.
- Quantify as diminution in share value. Instruct the valuation on the right measure from the start, because a claim quantified as repair cost will be reduced.
- Assess the seller's covenant strength. Establish where the consideration went before deciding how much to spend pursuing the claim.
- Review what the seller failed to disclose, separately from the warranties. The statutory duty under Article 122 is not limited by the warranty schedule, and it may cover matters the warranties never addressed.
Sellers facing a claim should move on the same timetable, reviewing the notice for defects and confirming the disclosure position before responding on the merits. Where the target holds intellectual property, the specific warranty package is covered in our article on IP risks in UAE M&A.
What can a buyer recover after completing a UAE acquisition?
Less than the headline warranty package suggests, and more than the cap implies, depending on which route the facts support. The contractual claim is capped, gated by the basket, and conditional on a notice served inside a window that is shorter than most buyers realise. The statutory claim is not capped at all, but it produces annulment rather than damages, which few buyers want as an outcome.
The single thing that most often goes wrong is timing. A buyer that treats the problem as a commercial matter to be resolved informally, and instructs lawyers only once that conversation fails, arrives at the deadline with an incomplete notice and a weakened position. The claim is then argued about procedure rather than about the AED the buyer lost.
The commercial consequence is straightforward. On a transaction where the price reflected earnings that turn out to have been overstated, the difference between a properly notified claim and a late one is the whole of the overpayment. Sellers know this, which is why notice defects are the first defence raised.
For buyers pursuing a warranty or indemnity claim, and for sellers defending one, our corporate and commercial team advises on claim strategy, notice drafting, escrow disputes and post-completion arbitration. Sellers preparing for an exit will find the related planning in our article on private equity exits in the UAE.
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