Codifies the DIFC's non-contractual obligations: negligence and other torts, misrepresentation, breach of confidence, agency, bailment, fiduciary duties and unjust enrichment, providing the common-law style framework that fills the gaps left by the Contract Law. Consolidated to 2024.
The Law of Obligations, DIFC Law No. 5 of 2005, codifies the non-contractual civil obligations that apply in the DIFC: torts, misrepresentation, breach of confidence, bailment, negotiable instruments, banking duties and fiduciary duties. It is the counterpart to the Contract Law, read with the Implied Terms in Contracts and Unfair Terms Law and the Law of Damages and Remedies. The current text is the Consolidated Version of March 2024, amended by DIFC Laws No. 2 of 2022 and No. 3 of 2024; the 2024 amendment added Chapter 5A on electronic trade documents.
Part 1 sets the general rules. Claims founded on the defendant's fraud have no time limit; other claims under the negligence, occupiers' liability and misrepresentation chapters accrue when the claimant knows or ought to know of the loss and must be brought within 15 years of accrual, and contribution claims within three years of judgment or settlement (Article 9). Causation requires both 'but for' causation and that the defendant's conduct was a substantial cause (Article 10). Part 3 Chapter 1 imposes joint and several liability for the same loss (Article 13), contribution (Article 14) and vicarious liability of employers and principals (Article 15).
The torts follow. Negligence requires a duty of care, breach and loss, with reduction for contributory negligence (Articles 17 to 21); pure economic loss is recoverable only where responsibility was assumed and reliance was reasonable (Article 20). Misrepresentation is an incorrect statement of fact made to induce a contract (Articles 29 and 30), deceit covers fraudulent statements (Article 31), and the economic torts include breach of confidence (Article 37) and passing off (Article 38). Chapters 7 to 10 cover wrongful interference with property, trespass, nuisance and defences; liability under Part 3 may be excluded or limited subject to the Unfair Terms Law (Article 59).
Part 4 imposes disclosure and utmost good faith duties in insurance. Part 5 regulates bailment (Article 71 and Schedule 2). Part 6 is a code on bills of exchange, cheques and promissory notes, including the rule that presenting a cheque more than six months after issue is unreasonable delay (Article 131); Chapter 5A gives electronic trade documents the same effect as paper ones (Articles 153A to 153G). Part 7 makes banker confidentiality a continuing duty (Article 155) but denies that the banker-customer relationship alone is fiduciary (Article 156).
Part 8 matters most to company officers. A person who undertakes to act for another in circumstances of trust and confidence is a fiduciary; company directors, partners, LLP members and employees are presumed to be (Article 158). A fiduciary owes an obligation of loyalty, detailed in Schedule 3, which may be restricted by contract subject to the Unfair Terms Law (Article 159). Breach gives the principal damages, an account of any benefit and the right to have the dealing set aside (Article 160). The Law is in force.
Any person who causes or suffers loss in the DIFC outside contract: companies, their directors, employees and agents, occupiers of DIFC premises, insurers and insureds, bailors and bailees, parties to bills, cheques and trade documents, banks and their customers, and fiduciaries and their principals.
| Article 9 | No limitation period applies where the cause of action arises from the defendant's fraud; claims under the negligence, occupiers' liability and misrepresentation chapters accrue on knowledge of the loss and must be brought within 15 years of accrual, and contribution claims within three years of judgment or settlement. |
| Articles 13–15 | Persons liable for the same loss are jointly and severally liable, with contribution between them as the Court or arbitrator finds just; employers are jointly liable for employees acting in the course of service and principals for agents acting within authority. |
| Articles 17–21 | Negligence requires a duty of care, breach and loss, with recovery reduced for the claimant's own negligence; a duty arises where harm is foreseeable, the relationship proximate and a duty fair, just and reasonable, and professionals are judged against an ordinary skilled practitioner. |
| Article 20 | Pure economic loss is recoverable only where the defendant assumed responsibility, the claimant relied on it and the reliance was reasonable; a person making a statement assumes responsibility to those likely to act on it. |
| Articles 29–31 | A misrepresentation is an incorrect statement of fact made to induce a contract, silence counting only where there is a duty to disclose; deceit is a statement made knowing it is false, without belief in its truth or recklessly, intended to be relied on. |
| Article 37 | A person must not misuse information they know or ought to know is confidential; public-domain, trivial and public-interest information is excluded, and disclosure with consent or as required by law is permitted. |
| Article 59 | Liability under Part 3 (the torts) may be excluded or limited by agreement, subject to the Implied Terms in Contracts and Unfair Terms Law. |
| Articles 61–63 | An insured must disclose every material fact a prudent insurer would want to know, all parties owe utmost good faith for the life of the contract, and a material breach allows the contract to be avoided. |
| Article 131 | Unreasonable delay in presenting a cheque discharges the drawer to the extent of loss suffered; presentation more than six months after issue is deemed unreasonable absent extenuating circumstances. |
| Articles 153A–153G | An electronic trade document has the same legal effect as its paper equivalent, can be possessed, indorsed and transferred, where a reliable system identifies it, protects it from alteration and gives one person exclusive control; it may be converted between forms and is not denied effect because issued outside the DIFC. |
| Articles 155–156 | A bank owes its customers a duty of confidentiality that continues after the relationship ends, but the banker-customer relationship alone does not make the bank a fiduciary. |
| Articles 158–160 | A person who undertakes to act for another in circumstances of trust and confidence is a fiduciary, company directors, partners, LLP members and employees being presumed so; a fiduciary owes loyalty as detailed in Schedule 3, and on breach must pay damages, account for any benefit and may have the dealing set aside. |
The Law creates civil liability, not fines. A defendant is liable for the whole of a loss it substantially caused (Article 10), jointly and severally with others liable for the same loss (Article 13). A fiduciary in breach must compensate the principal, account for any benefit obtained and may see the tainted agreement set aside by the Court (Article 160). Damages are quantified under the separate Law of Damages and Remedies.
This is the law that gives a DIFC directorship its personal exposure. When we appoint a director to a client's DIFC company, or provide a nominee director, Article 158 presumes that person a fiduciary and Article 159 and Schedule 3 fix the loyalty, no-conflict and no-secret-profit duties, so our engagement terms and board minutes are drafted with those duties in view and conflicts are declared and recorded. We rely on Article 37 when drafting confidentiality undertakings for DIFC entities, and on Article 20 and Articles 29 to 31 when a client wants a warranty, disclosure letter or non-reliance clause to hold up: a careless statement that induces a contract is a misrepresentation under Article 40. Clients using a DIFC entity for trade finance ask about Chapter 5A, which since 2024 lets bills, notes and other trade documents exist in electronic form. We also point to Article 155 when a bank's confidentiality obligations to a DIFC account holder are questioned.
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