UAE Trends and Developments Contributed by: Amir Alkhaja, Areen Jayousi, Gulsun Ozmen and Alia AlMarzooqi, Habib Al Mulla & Partners
Navigating Uncertainty: Force Majeure, Hardship and the UAE Civil Transactions Law The UAE continues to develop the legal infrastructure governing commercial relationships, and that frame - work is now being tested by current conditions. The region is experiencing geopolitical pressures that have resulted in active conflict. Although the UAE is not a party to that conflict, it has experienced consequenc - es within its territory and for its assets. Against that backdrop, how UAE law responds to disruption, whether arising from geopolitical conflict, global pandemics, supply chain shocks or climate- related events, is a question of direct practical rel - evance for businesses of all sizes operating in, or transacting with counterparties from, the UAE market. This chapter examines three interconnected themes that are currently reshaping contracting practice in the UAE: • the doctrine of force majeure; • the concept of hardship and judicial price revision; and • the Civil Transactions Law framework Both Federal Law No 5 of 1985 (the “Old CTL”) and the new Federal Decree-Law No 25 of 2025 (the “New CTL”), which came into force on 1 June 2026, are examined. Together, these themes define the bounda - ries of contractual obligation in times of stress; under - standing them is essential for any business seeking to do business in, or with counterparties from, the UAE. Force majeure under UAE Law: what it means in practice Under UAE Law, force majeure is the principle where a party is excused from performing its contractual obligations when performance becomes impossible due to an event beyond its control. It operates differ - ently from the way it is understood in common law jurisdictions. The statutory basis Force majeure in the UAE has a statutory basis in both the Old CTL and the New CTL. Under Article 273 of the Old CTL (Federal Law No 5 of 1985), if performance of an obligation became impossible due
to a foreign cause not attributable to the obligor, the corresponding obligation was extinguished and the contract terminated by operation of law. The New CTL, under Article 236, preserves this core principle but modernises its expression: in bilateral contracts, a force majeure event making performance impossi - ble causes the reciprocal obligations to lapse and the contract to dissolve ipso jure. This is a significant provision in both iterations of the law. Unlike many common law systems where force majeure only applies if expressly included in the contract, UAE law has always provided a base - line statutory right to rely on impossibility as a ground for discharge. The New CTL introduces two notable refinements: • first, on partial impossibility, either party may now insist on lapse of the corresponding obligation or petition for rescission (compared to the Old CTL, which simply extinguished the impossible part); and • second, in continuing contracts subject to tempo - rary impossibility, Article 236 (3) of the New CTL expressly empowers either party to seek modifica - tion of the contract, a remedy not available under the Old CTL. The key requirements for successfully invoking force majeure under Article 273 of the Old CTL and Article 236 of the New CTL are as follows: • the event must have rendered performance impos - sible, not merely more difficult or more expensive; • the event must be unforeseeable at the time of contracting; • the event must be irresistible, meaning the party could not have avoided or overcome it by reason - able means; and • the event must not be attributable to the fault or negligence of the party seeking to rely on it. Total versus partial impossibility UAE law draws an important distinction between total and partial impossibility. Where performance is entire - ly impossible, the contract is terminated in its entirety, and both parties are released from their obligations. Where performance is only partially impossible, the contract survives but is reduced to the extent of what
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