Can Businesses Invoke Force Majeure in Their Contracts Following the Recent Events?
Recent developments have again raised a familiar question for businesses operating in the UAE and internationally: can contractual obligations be suspended or excused because of unforeseen events? While headlines often focus on the political dimension of such developments, the more practical concern for businesses lies in their contractual exposure and whether legal doctrines such as force majeure apply.
This discussion is particularly relevant considering legislative developments in the UAE, including the upcoming civil transactions law reforms to take effect in June. Understanding how force majeure operates under the current legal framework, and how it may evolve under the new law, is essential for businesses managing contractual risk.
The Concept of Force Majeure Under UAE Law
Under the current UAE legal framework, force majeure is primarily governed by Federal Law No. 5 of 1985 (UAE Civil Transactions Law). The law recognises that certain extraordinary events may make the performance of contractual obligations impossible.
Article 273 provides the core rule. Where a force majeure event renders the performance of a contract impossible, the corresponding obligation is extinguished, and the contract may be automatically cancelled. If the impossibility is only partial, the obligation is reduced to the extent of the impossibility, and the party affected may cancel the contract in respect of the impossible portion.
In practice, UAE courts have consistently interpreted force majeure narrowly. To qualify, the event must generally meet three key conditions: the civil transaction law.
- It must be unforeseeable at the time of contracting.
- It must be unavoidable and beyond the control of the parties.
- It must render performance impossible, not merely more difficult or costly.
Events that typically fall within the scope of force majeure may include natural disasters, major governmental restrictions, or extraordinary disruptions that objectively prevent contractual performance.
Key Distinction Between the Current and Upcoming Framework
While the underlying doctrine remains stable, the main differences can be summarized as follows:
- The current law relies more directly on statutory provisions, particularly Articles 273 and 249.
- The new framework reinforces the role of contractual clauses, meaning the wording of force majeure provisions may carry greater weight.
- Courts may place greater emphasis on the allocation of risk agreed between the parties when determining whether a party may rely on force majeure.
Developments Under the New Civil Transactions Law
The UAE is introducing updates to the Civil Transactions framework that will take effect in June. While the core principles governing force majeure remain broadly consistent with the current law, the reforms aim to modernise contractual provisions and provide greater clarity in the application of certain doctrines.
The general structure continues to recognise that obligations may be extinguished where performance becomes impossible due to events beyond the parties’ control. However, the newer provisions place increased emphasis on contractual autonomy, and the importance of the parties agreed force majeure clauses.
In practice, this means that courts are likely to examine the wording of the contract more closely when determining whether an event qualifies as force majeure and what consequences should follow.
Legal Impact of Recent Events on Contracts
Recent geopolitical and economic developments might have caused disruptions to supply chains, transportation routes, and cross-border commercial activity in several sectors. From a legal perspective, these events may affect contractual obligations where they create genuine barriers to performance.
However, the legal analysis remains fact specific. A disruption affecting global shipping routes, for example, may significantly impact logistics and transportation contracts. In contrast, other sectors may experience only indirect commercial consequences, which may not meet the threshold required for force majeure.
Courts typically assess several factors in these situations, including whether the event was foreseeable, whether alternative means of performance existed, and whether the affected party took reasonable steps to mitigate the impact.
Are Recent Events Automatically Force Majeure?
Recent events do not automatically constitute force majeure under UAE law. The mere existence of political or economic disruption is not sufficient. What matters is whether the specific contractual obligation has become objectively impossible to perform due to the event.
For example, if a transportation route is completely blocked by government restrictions, a logistics provider may be able to rely on force majeure if delivery becomes impossible. On the other hand, if the same disruption merely increases costs or delays delivery but alternative routes remain available, courts may find that force majeure does not apply.
This distinction is critical, as the legal consequences can range from temporary suspension of obligations to termination of the contract.
Practical Considerations for Businesses
Businesses should review their contracts carefully and seek legal advice, particularly the force majeure clauses included in their agreements. Many commercial contracts define force majeure events explicitly and outline procedures such as notice requirements, mitigation obligations, and suspension periods.
The contractual wording often plays a decisive role in determining whether the doctrine applies. Parties should also document the specific ways in which external events affect their ability to perform their obligations.
Need for Legal Advice
It’s critical to obtain legal advice on any contracts before business can trigger the Force Majeure clause that is because if Force Majeure is triggered incorrectly the party’s suspension and termination of its obligations will constitute a breach of contract and will intake substantial losses and damages. Therefore, we need to rely on solid legal advice for invoking Force Majeure in order not to place your business in breach
Conclusion
Force majeure remains an important legal mechanism for managing unforeseen disruptions in commercial relationships. Under the UAE Civil Transactions Law, the doctrine is applied cautiously and requires clear evidence that an extraordinary event has made performance impossible.
Ultimately, force majeure can only be triggered where parties are genuinely prevented by the current situation from performing their contractual obligations. Certain sectors or industries may experience a greater impact than others, with logistics and supply chain operations often being among the most directly affected.
In such situations, obtaining best legal advice becomes essential. At Charter Legal, our team of some of the best lawyers advises businesses on reviewing contractual force majeure clauses, assessing whether current events may legally justify suspension or termination of obligations, and developing appropriate legal strategies to manage contractual risks. With our best experience in commercial, real estate, and dispute resolution matters in the UAE, we advise businesses in navigating contractual uncertainties while ensuring compliance with the applicable legal framework.