Force Majeure vs. Exceptional Circumstances under UAE Law: Key Points in a Context of Regional Tensions
In the current context of regional tensions, many businesses are reassessing their contractual obligations and considering whether force majeure can be invoked to suspend or terminate commercial or even lease agreements.
A recurring question is: “Can we invoke force majeure to suspend or terminate our contract without incurring liability?”
Confusion often arises because force majeure is frequently conflated with exceptional circumstances (the concept of hardship in common law), although these two mechanisms are legally distinct.
1. Two Concepts, Two Legal Regimes
1.1 Exceptional Circumstances (Article 249 of the UAE Civil Code)
Performance remains possible, but becomes excessively burdensome.
Article 249 requires the cumulative demonstration of the following elements:
- an exceptional and unforeseeable event
- a general situation (not specific to the debtor)
- a significant economic imbalance
When these conditions are met, and failing an agreement between the parties, the court may rebalance the contract. The objective is to adapt the contract; termination is not automatic.
1.2 Force Majeure: Performance Becomes Impossible
The claimant must cumulatively prove:
- an event beyond control
- an unforeseeable event
- an unavoidable event
- a direct causal link with the non‑performance
Force majeure extinguishes contractual obligations and results in the termination of the contract, rather than a mere suspension. The purpose is to end a contract that has become impossible to perform.
2. Approach of UAE Courts
UAE courts adopt a strict and fact‑based approach, with a high burden of proof:
- impossibility must be real and demonstrated
- the event must be the direct cause
- the debtor must not already be in default
- alternatives must be examined in detail
Regarding exceptional circumstances, the court may — but is not obliged to — rebalance contractual obligations, for example by reducing an obligation to a reasonable level. This mechanism is grounded in principles of equity and fairness. Any clause excluding this mechanism is void, as it is a matter of public policy.
3. Practical Illustrations
3.1 Maritime Transport – Closure of the Strait of Hormuz
- a single contractual route that becomes closed → force majeure may apply
- an alternative route exists and is contractually possible but more expensive → no force majeure, but exceptional circumstances may justify rebalancing
→ Increased cost alone is insufficient.
3.2 Commercial or Residential Leases
- voluntary departure of the tenant while the premises remain usable → no force majeure; a negotiated solution should be prioritised
- premises become unusable (destruction, falling debris, evacuation order, etc.) → force majeure is established
4. Key Points of Vigilance
Before invoking force majeure, it is essential to:
- review the contractual clauses
- determine whether performance is impossible or merely more costly
- identify and document possible alternatives
- assess whether the situation is temporary
In some cases, suspension or adaptation of the contract may be more appropriate than termination.
Understanding the distinction between force majeure and exceptional circumstances is crucial to avoid misclassification, which may lead to legal and financial risks or an abusive invocation that could trigger liability.
Disclaimer
The above developments constitute general information and not formal legal advice. A prior legal assessment is strongly recommended before taking any decision. Our firm remains available to review your specific situation and assist you in mitigating risks and potential disruptions.