The Legal Impact of Force Majeure on Contractual Obligations in the UAE

In contractual relationships, extraordinary and unforeseen events can arise, altering the expectations and obligations of the contracting parties. These disruptions are often beyond the control of either party. In UAE, the principle of force majeure serves as a legal construct for addressing such situations, providing a framework for mitigating the adverse effects of unforeseen events on contractual obligations.

In UAE the concept of force majeure is based on the provisions of Federal Law No. 5 of 1985, which comprehensively governs contractual relationships. The legal framework ensures a balance between the rights and responsibilities of the contracting parties, safeguarding the principle of fairness in the face of extraordinary circumstances.

Essential Elements of Force Majeure:

For the principle of force majeure to apply under UAE law, specific conditions must be met:

1) Un-foreseeability:

• The event must have been unforeseeable at the time the contract was formed. Examples include pandemics, earthquakes, terrorism, or other large-scale disruptions. Routine or anticipated risks, such as market fluctuations, are not considered force majeure events.

2) Unavoidability:

• The consequences of the event must have been unavoidable, despite reasonable efforts and the implementation of mitigation measures to minimise its impact.

3) Impossibility of Performance:

• The event must render the performance of contractual obligations impossible, not merely more costly or inconvenient. For instance, the destruction of goods due to a force majeure event meets this criterion, whereas increased operational costs do not.

Force Majeure under UAE Civil Transactions Law (Federal Law No. 5/1985)

The UAE Civil Transactions Law governs contracts and obligations, including the principle of force majeure. This legal doctrine provides relief to parties when unforeseen events make contractual performance impossible.

The key provisions are set out in two notable articles and include:

1) Article 273:

• In bilateral contracts, if a force majeure event renders the performance of an obligation impossible, the corresponding obligation is extinguished, and the contract is automatically rescinded.
• If the impossibility is partial, the consideration for the impossible part is extinguished. This also applies to temporary impossibility in continuous contracts. In both cases, the creditor may rescind the contract, provided the debtor is aware of the impossibility.

2) Article 287:

• Unless otherwise stipulated by law or agreement, a person is not liable for damages if they can prove that the harm was caused by factors beyond their control, such as natural disasters, unforeseen circumstances, force majeure, or the fault of another party or the victim.

Analysis of Force Majeure Provisions under UAE Civil Transactions Law (Federal Law No. 5/1985)

Together articles 273 and 287 of the UAE Civil Transactions Law provide a comprehensive framework for addressing force majeure and its implications on contractual obligations.

Article 273 specifically governs contractual relationships, stipulating that if a force majeure event renders the performance of obligations impossible, the corresponding obligations are extinguished, and the contract is automatically rescinded. In cases of partial or temporary impossibility, the contract may be adjusted to reflect the affected obligations, with the creditor retaining the right to rescind the agreement if the debtor is aware of the impossibility. These provisions aim to safeguard parties from the consequences of unforeseen events while ensuring fairness by addressing both complete and partial impossibility.

In contrast, Article 287 takes a broader approach, addressing general liability for harm caused by uncontrollable external events. It exempts parties from liability for damages if they can prove that the harm resulted from causes beyond their control, such as natural disasters, unforeseen circumstances, or the fault of another party or the victim. This complements Article 273 by reinforcing the principle that liability should not be imposed in situations entirely outside a party's control, promoting equitable risk allocation.

The Dubai Cassation Court has clarified that the burden of proof lies with the party invoking force majeure. They must demonstrate that their inability to perform or fulfill contractual obligations was directly caused by a force majeure event. This requirement highlights the importance of providing adequate evidence to support such claims, ensuring that relief is granted only in genuine cases.

Together, Articles 273 and 287 establish a structured legal framework that balances contractual obligations, manages risks arising from unforeseen events, and promotes fairness in the allocation of liabilities.

Legal Implications of Force Majeure

The consequences of a force majeure event depend on its effect on contractual obligations:

1) Automatic Termination (Total Impossibility)

• If performance becomes entirely impossible, such as the destruction of goods, the contract is automatically terminated, and neither party is held liable for non-performance.

2) Suspension or Modification (Partial or Temporary Impossibility)

• For partial or temporary impossibility, courts may modify or suspend contractual obligations. For example, if a supplier cannot deliver goods due to a port closure caused by force majeure, delivery obligations may be temporarily suspended until the port reopens.

The UAE courts evaluate force majeure claims on a case-by-case basis, considering the contract terms, the nature of the disruption, and efforts made by affected parties to mitigate losses. The Court of Cassation has emphasised that invoking force majeure or unforeseen events as a defence requires clear evidence that non-performance or delays were directly caused by the event and not due to the debtor’s negligence. If negligence is found, the debtor cannot rely on force majeure as a defence.

Conclusion

Force majeure is a pivotal legal concept in the UAE, offering a framework to address the impact of unforeseen and uncontrollable events on contractual relationships. In accordance with Federal Law No. 5 of 1985, it provides an equitable mechanism for managing situations where obligations cannot be fulfilled due to such events.

The application of force majeure depends on meeting specific legal requirements, including that the event was unforeseeable, unavoidable, and rendered performance impossible. Articles 273 and 287 of the Civil Transactions Law establish the legal foundation for addressing these circumstances, ensuring fairness by relieving parties of their obligations when force majeure conditions are met. This structured approach maintains contractual balance and promotes justice in the face of unexpected disruptions.