UAE Trends and Developments Contributed by: Amir Alkhaja, Areen Jayousi, Gulsun Ozmen and Alia AlMarzooqi, Habib Al Mulla & Partners
remains possible, and the counterparty has the right to terminate if the partial performance would be of no value to it. The notification requirement A frequently overlooked but practically important requirement is that the party seeking to rely on force majeure must notify its counterparty promptly. Failure to give timely notice may result in the loss of the right to rely on the excuse or may give rise to a damages claim for losses caused by the delay in notification. Contracts governed by UAE law should therefore always include a clearly drafted notification clause that specifies the form, timing and recipient of force majeure notices. Contractual force majeure clauses The existence of a statutory regime does not make contractual force majeure clauses redundant. On the contrary, a well-drafted contractual clause can expand, restrict or clarify the scope of the statutory right in ways that provide greater certainty for both parties. Contractual clauses can, for instance: • specify events that will or will not constitute force majeure (such as geopolitical conflict, pandemics, sanctions or cyberattacks); • prescribe the consequences of a force majeure event (suspension of obligations, extension of time or termination after a specified period); • allocate the risk of partially impossible performance differently from the default statutory position; and • establish the procedure and timing for invoking the clause. Where a contract contains a force majeure clause, UAE courts will give effect to it to the extent that it does not violate mandatory provisions of law or public policy. The interaction between the contractual clause and the statutory default must therefore be carefully mapped in any contract governed by UAE law. The hardship doctrine: when performance becomes excessively burdensome Force majeure addresses situations where perfor - mance is impossible. When performance remains technically possible, but has become significantly more burdensome due to a material change in cir -
cumstances, such that it would be unfair to hold the obligor to the original terms, it becomes the domain of the hardship doctrine. The hardship doctrine is one of the most distinctive and practically important features of the UAE’s civil law framework. Article 249 of the Old CTL and Article 224 of the New CTL The hardship doctrine in the UAE is principally ground - ed in Article 249 of the Old CTL and Article 224 of the New CTL. Under the Old CTL, a court could, hav - ing regard to the interests of both parties, reduce the onerous obligation to a reasonable level. The New CTL preserves this power but adds a significant new remedy: Article 224 expressly empowers the court to order rescission of the contract in addition to, or instead of, reduction of the obligation. This expan - sion gives courts greater flexibility to achieve a just outcome where reduction alone would be inadequate. This is a notable provision by comparative standards, and has been so since its introduction in 1985. Both the Old CTL and the New CTL give UAE judges the power to revise contractual obligations where super - vening circumstances have fundamentally altered the original economic balance of the agreement. The New CTL reinforces and extends this by also expressly per - mitting rescission, reflecting an acknowledgment that in some cases revision is insufficient to restore fair - ness between the parties. The key requirements are as follows: • the circumstances must be exceptional, that is, not within the ordinary range of commercial risk; • they must be unforeseeable at the time the con - tract was concluded; • they must make performance excessively burden - some, not merely inconvenient or less profitable; and • the threat of serious loss must be ongoing, not historical. Judicial price revision in practice Article 249 of the Old CTL continues to be actively invoked before the UAE courts in respect of contracts entered into during the period of its operation. Article 224 of the New CTL now governs contracts entered
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