Regional Updates

Contractual Responsibilities & Force Majeure Considerations

Given the current regional developments, many businesses are reviewing their contractual obligations and operational exposure. From a UAE legal perspective, the following practical points may be useful for companies operating in the region:

1. Absence of a Force Majeure Clause in the Contract

• In the UAE, force majeure is regulated under Articles 273–287 of the Civil Transactions Law.

• The UAE follows a Civil Law system, where it is not necessary to explicitly mention provisions already covered by law.

• Whether a party can rely on force majeure depends primarily on court discretion and whether the conditions prescribed by law are met.

• The main conditions to establish force majeure are:

• The occurrence of an exceptional event or accident.
• The event is unforeseeable and unusual.
• The event is unexpected.
• The event is unavoidable.
• Reasonable precautions were taken, and no fault was committed to avoid it.

2. “Impossibility” vs. “Difficulty” Under UAE Law

• Under Article 273 of the UAE Civil Transactions Law, a contract may be terminated if an unforeseen event makes the performance of obligations objectively impossible.

• However, UAE courts generally distinguish between:

• Impossibility (which may discharge obligations), and
• Commercial hardship or increased cost (which usually does not).

• In practice, many disputes arise where parties attempt to invoke force majeure when the obligation has become more difficult or expensive rather than impossible.

3. Partial or Temporary Impact

• If performance is only partially or temporarily impossible, the contract may not automatically terminate.

• Instead, the obligations affected may be suspended, modified, or renegotiated, depending on the circumstances. 

4. Duty to Mitigate and Communicate

Businesses should ensure that they:

• Document operational impacts affecting performance (e.g., supply chain disruptions, regulatory restrictions).
• Explore commercial solutions, such as extensions or amended delivery schedules, before escalating disputes.

5. Early Legal Review is Recommended

Each situation should be assessed on a case-by-case basis, taking into account:

• The actual impact on performance, and
• Applicable UAE law conditions.

Seeking legal advice early can often help businesses avoid disputes and preserve commercial relationships.

For further guidance, members may reach out to Ahmad Lootah and the team at Hussain Lootah & Associates.

Contact: [email protected]