Since 2020, the “Force Majeure” clause has moved from the fine print to the center of negotiation tables. In Dubai, the interpretation of Force Majeure is derived directly from the UAE Civil Code, specifically Article 273.
However, there is often confusion between Impossibility (Force Majeure) and Hardship (Exceptional Circumstances). Mixing these up in a legal argument can be fatal to your case.
The Definition of Force Majeure (Article 273)
Under Article 273, Force Majeure requires absolute impossibility.
- The event must be unforeseeable.
- The event must be unavoidable.
- The event must render performance impossible, not just difficult or expensive.
If these conditions are met, the corresponding obligation ceases, and the contract is automatically cancelled.
Partial vs. Total Impossibility
The law distinguishes between total and partial impossibility:
- Total Impossibility: The entire contract is cancelled.
- Partial Impossibility: Only the specific part of the contract that cannot be performed is extinguished. The rest of the contract remains valid.
The “Hardship” Doctrine (Article 249)
What if performance isn’t impossible but has become financially disastrous due to an unforeseen event (e.g., a massive spike in raw material costs due to war)? This is not Force Majeure. This falls under “Exceptional Circumstances” (Article 249).
In this scenario, the contract is not terminated. Instead, a judge has the discretion to reduce the burdensome obligation to a “reasonable level.” This might mean adjusting the price or extending the timeline to balance the hardship between both parties.
Does a Market Crash Count?
Generally, UAE courts do not consider normal market fluctuations or economic downturns as Force Majeure. These are considered standard commercial risks.
To claim Force Majeure, the event must be an external, overpowering force (like a natural disaster, sudden war, or government ban on trade).
Drafting Recommendations
Do not rely on the standard “Act of God” definition.
- Be Specific: List events relevant to your industry (e.g., “closure of ports,” “revocation of licenses,” “epidemics”).
- Define Consequences: Explicitly state whether the contract terminates immediately or suspends for a period (e.g., 30 days) before termination.
- Notice Period: Strict requirements for notifying the other party must be included to avoid waiving the right to claim Force Majeure.
Conclusion
In Dubai courts, the burden of proof lies on the party claiming Force Majeure. It is a high bar to clear. Before declaring Force Majeure, consult with a legal expert to determine if your situation falls under Article 273 (Termination) or Article 249 (Adjustment).
Unsure if you can suspend your contract obligations? Contact DY Legal Consultants for a review of your Force Majeure rights.
