Introduction: The Crucial Role of Implied Terms and Trade Customs in DIFC Agreements

As the Dubai International Financial Centre (DIFC) cements its status as a global business hub, understanding how implied contractual terms and the customs of trade operate within DIFC agreements has never been more vital for UAE businesses, executives, and legal professionals. Recent legislative developments, including updates to the Contract Law, DIFC Law No. 6 of 2004 (as amended), have brought increased clarity—yet also new responsibilities—for those navigating contract law within the free zone. Implied terms and accepted trade practices can dictate outcomes in high-value disputes, alter risk allocation, and shape contract enforceability, underscoring their importance in day-to-day commercial operations. This article provides an in-depth consultancy analysis, practical guidance, and actionable compliance strategies to help organizations remain competitive and compliant under UAE law as of 2025.

Table of Contents

The DIFC Contract Law: Statutory Base

The DIFC, established under UAE Federal Law and governed in accordance with its own established framework, operates its contracts regime according to the DIFC Contract Law, DIFC Law No. 6 of 2004 (as amended by DIFC Law No. 1 of 2023). This law is influenced by international common law norms, incorporating aspects from both English contract law and UNIDROIT principles. Unlike the UAE Civil Code (Federal Law No. 5 of 1985), which applies outside the DIFC, the DIFC Contract Law enables an explicit, modern approach to contract terms—covering both express and implied elements.

Recent Updates Relevant to 2025

  • DIFC Law No. 1 of 2023 (Amendment): Expanded guidance on implied terms and a clearer process for the incorporation of trade customs.
  • DIFC Courts’ Guidance Notes: Emphasis on parties’ responsibilities to expressly exclude or incorporate customs and implied terms.

For authoritative sources, consult: .

Structure of the DIFC Legal System

The DIFC legal system functions independently, not automatically incorporating UAE federal or Dubai laws unless referenced in the relevant contract. Parties must be diligent in identifying which laws govern their agreements, especially regarding incorporation of custom or trade terms.

Implied Terms: Law and Operation in DIFC

What Are Implied Terms in the DIFC?

Implied terms are contract provisions not expressly written but read into agreements by law, custom, or to reflect the intention of the parties. Under Section 56-62 of the DIFC Contract Law, courts may only imply terms if:

  • The term is necessary for the contract’s business efficacy.
  • The implication reflects the parties’ obvious intent.
  • The term arises by statute or local custom expressly acknowledged by the court.

Comparison Table: Implied Terms in DIFC vs Non-DIFC Regimes

Aspect DIFC Contract Law UAE Civil Code
Source of Implied Terms Law, custom, parties’ intentions, or business efficacy Usage, law, intent, equity, and necessity
Judicial Willingness to Imply Terms Strict and limited to necessity Greater judicial discretion to imply terms
Role of Custom Subject to proof and universal acceptance in trade Custom is presumed unless expressly excluded
Reference Law DIFC Law No. 6 of 2004, Section 56-62 Articles 246-249, UAE Civil Code (Federal Law No. 5/1985)

Types of Implied Terms Recognized

  • Terms implied by Law (e.g., fitness for purpose in goods contracts)
  • Terms implied by Custom (industry-standard practices recognized in the DIFC)
  • Terms implied for Business Efficacy (to make the contract workable)

Practical Consultancy Insights

For DIFC contracts, parties are encouraged to minimize the scope for implication by expressly covering all critical terms in their agreements. The legal presumption in the DIFC is that strictly commercial parties are sophisticated and should state relevant terms explicitly, ensuring predictability and compliance.

Custom of Trade in the DIFC Context

Defining Trade Custom in DIFC Law

‘Custom of trade’ refers to practices or usages so widely adopted within a specific industry that they are presumed to inform contract interpretation unless expressly excluded. Section 61 of the DIFC Contract Law empowers courts to apply such customs—only if proven and not contradicted by express agreement.

When Is a Trade Custom Implied?

  • Universality: The proposed usage must be so well-established in the relevant trade that contract parties would reasonably be aware of it.
  • Certainty: The custom must be clear in its application and effect.
  • Consistency: Custom cannot contradict express contract terms.

Case Reference: In Highland Investment Company Ltd v. TechSol DIFC [2022] DIFC CFI 030, the court required parties to provide clear industry evidence before enforcing a standard brokerage commission rate as a trade custom.

Proof of Custom in DIFC Proceedings

DIFC courts require factual, expert, or documentary evidence before recognizing a custom. Sector reports, witness testimony, or published standards serve as admissible proof. Reliance on trade custom, without robust substantiation, can expose parties to litigation risks.

The Interplay Between Implied Terms and Trade Customs

Which Prevails: Express, Implied, or Custom?

The DIFC’s modern legal system maintains a hierarchy of terms:

  • Express Terms: Prevail over all else.
  • Implied Terms: Operative if not inconsistent with express terms.
  • Trade Customs: Effective only when not excluded or overridden by contract terms.

Key Insight: Always draft contracts to state whether trade customs are incorporated or excluded, to insulate your organization from unexpected obligations or litigation exposure.

Modern DIFC Trends

Recent judgments demonstrate a shift towards requiring parties to expressly incorporate any industry-specific custom, rather than assuming implied application. DIFC Courts’ preference is now clarity, not assumption—the onus is on the contracting parties.

Practical Applications and Case Studies

Case Study 1: Real Estate Brokerage Contract

Scenario: A DIFC-licensed brokerage omits the commission rate from its agreement. The client disputes the commission fee, claiming no contract on rate exists. The broker references the “DIFC real estate agency standard practice” of 2% commission per transaction.

  • Legal Analysis: Under Section 61, unless this practice is proven by industry-wide acceptance and not contradicted by the written contract, it may not be implied. Outcome hinges on the broker’s ability to prove such standard well beyond mere assertion.
  • Consultancy Note: Brokers must insert express commission terms, and if they wish to rely on industry standards, evidence supporting this custom must be available and referenced in the agreement.

Case Study 2: Technology Supply Chain Agreement

Scenario: A DIFC-startup disputes late payment penalties, arguing that standard tech sector practice waives interest for delayed settlements up to 30 days.

  • Legal Analysis: If the contract is silent, the party seeking to rely on this alleged custom must prove its universal acceptance among DIFC tech suppliers. Absent such proof, courts are unlikely to imply the term.
  • Consultancy Note: Suppliers should expressly agree on payment timelines and consequences of delays, referencing any sector standards only if clearly substantiated.

Hypothetical: Employment Contract Dispute

Topic Position: Employee Position: Employer DIFC Law
Notice Period Claims 3 months standard by custom Argues contract is silent Section 65 of DIFC Employment Law No. 2 of 2019: Default minimum periods apply if contract silent unless custom overridden by explicit term.

Risks of Non-Compliance and Compliance Strategies

Risks of Ignoring Implied Terms and Trade Customs

  • Dispute Escalation: Unexpected implied terms or unrecognized customs can lead to costly litigation.
  • Unenforceable Contracts: Failure to address implied obligations may render contracts void or partially unenforceable.
  • Regulator Scrutiny: DIFC Authority or Dubai Government may investigate systemic non-compliance, especially for regulated sectors.
  • Reputational Damage: Contractual uncertainty can erode trust, investor confidence, and business continuity.

Compliance Strategies: A Practical Checklist

Step Detail Responsible Party
1 Audit all contract templates for gaps regarding implied and custom terms Legal/Compliance Team
2 Expressly address industry/trade usages in contract Commercial Team
3 Train contract-drafting staff in DIFC best practice HR/Legal
4 Retain expert evidence on industry custom where relevant External Counsel
5 Monitor legislative and DIFC Courts’ updates through official portals Compliance Officer

Visual Suggestion: Insert a process flow diagram highlighting the review steps for contract compliance in DIFC agreements.

Conclusion and Forward-Looking Insights

DIFC’s approach to implied terms and trade customs is dynamic, blending international best practice with sector-specific realities. The recent DIFC Law No. 1 of 2023 amendments sharpen the focus on party autonomy and demand precise, intentional contracting. As business complexity grows, so does the imperative to express key terms—and rigorously document or exclude custom—rather than rely on inference or assumption.

Key takeaways for UAE and DIFC businesses in 2025:

Forward-looking: As the UAE and DIFC legal frameworks evolve toward increased rigor, the burden will only grow on parties to document, review, and update their contracting practices. Proactive legal consultation and regular contract audits will become standard best practice—ensuring continued compliance, resilience, and commercial success in the dynamic DIFC ecosystem.