THE AUTHOR:
Dr Aseel Zimmo, FCIArb, Independent International Arbitrator & Mediator
As geopolitical instability and economic volatility increasingly disrupt contractual performance, businesses operating across the UAE’s civil and common law jurisdictions must rethink traditional approaches to risk allocation. This article examines the evolving legal landscape governing force majeure, hardship, causation, and notice obligations, and explores the contractual and strategic tools necessary to mitigate risk and manage disputes effectively in times of conflict and uncertainty.
In periods of geopolitical instability and economic volatility, contractual risk allocation is tested in ways rarely anticipated at the drafting stage. Across the United Arab Emirates, whether in onshore jurisdictions such as Dubai and Abu Dhabi or in common law financial free zones such as the Dubai International Financial Centre (“DIFC”) and Abu Dhabi Global Market (“ADGM”), businesses are increasingly confronting the limits of their contractual protections. Recent conflict-driven disruptions, inflationary pressure, and regulatory intervention have sharpened the practical significance of governing law choices. The divergence between civil law and common law frameworks is not merely academic; it is often outcome-determinative, particularly in sectors such as construction and infrastructure, energy, and long-term supply agreements that are structurally exposed to external shocks.
The new Federal Law No. 25 of 2025 (New Civil Code), which entered into effect on 1 June 2026, has amended statutory mechanisms addressing hardship and supervening events. Article 224 of the New Civil Code prescribes the doctrine of exceptional circumstances, allowing courts or tribunals to reduce an obligation to a reasonable level or terminate the contract where exceptional circumstances that could not have been foreseen at the time of contracting render performance excessively onerous, threatening serious loss. The new Civil Code provided additional relief to parties in construction contracts under Article 829(3), namely, ‘restoration of the contractual equilibrium, including the extension of the execution period and the increase or reduction of the remuneration. However, the circumstances must disrupt the contractual balance and undermine the financial basis of the contract.
Article 236 of the New Civil Code provides that, in bilateral contracts, where a force majeure event renders performance impossible, the corresponding obligation is extinguished, and the contract is automatically terminated by operation of law. In the case of partial or temporary impossibility, a party may apply to a court for termination of the entire contract. This reflects the fundamental civil law principle that obligations cannot be enforced where performance has become objectively impossible due to circumstances beyond the control of the parties.
The provision distinguishes between different degrees of impossibility and their legal consequences. Where the impossibility is total, the contract is rescinded in its entirety, and the parties are discharged from their obligations without liability. Where the impossibility is partial, only the affected part of the contract is extinguished, and the remainder continues to subsist. In the context of continuing or long-term contracts, where the impossibility is temporary, performance may be suspended for the duration of the force majeure event.
This framework is complemented by Article 249 of the UAE Civil Code, which provides that a party shall not be liable to compensate for damage if such damage arises from a foreign cause beyond its control in which it played no part, including unavoidable accidents, or the act of a third party or the aggrieved party, unless otherwise agreed or provided by law. In practical terms, it operates as a defence to claims for damages, provided that the affected party can establish a clear causal link between the foreign event and its inability to perform.
The practical effect is that UAE law provides a safety net that may extend beyond the strict wording of the contract, allowing for judicial intervention where fairness so requires. However, reliance on these doctrines requires careful legal characterisation. The distinction between these doctrines is not merely academic; it is determinative of both entitlement and remedy.
Accordingly, claims must be precisely formulated and evidence led. This includes clearly identifying:
- the legal doctrine being relied upon;
- (ii) the causal link between the external event and the impact on contractual performance; and
- (iii) the steps taken to mitigate the effects of that disruption. UAE Courts and tribunals are receptive to these doctrines, but they will not apply them in the abstract. They require a coherent narrative supported by contemporaneous evidence and consistent conduct.
UAE courts have consistently adopted a strict approach to force majeure, requiring objective impossibility rather than mere hardship or increased burden. In Abu Dhabi Court of Cassation Judgment No. 835 of 2021 and Dubai Court of Cassation Judgment No. 479 of 2021, the courts confirmed that force majeure arises only where an unforeseeable external event renders contractual performance impossible. Recent jurisprudence has reinforced this position. In Dubai Court of Cassation Judgment No. 174 of 2023, the Court stressed that the event must be extraordinary, unforeseeable, and unavoidable, while also requiring a direct causal link between the event and the impossibility of performance. The Court further clarified that the defence is unavailable where non-performance is attributable, even partially, to the debtor’s fault. In Judgment No. 480 of 2024, the Court highlighted the importance of expert evidence and confirmed that unaffected contractual obligations must still be performed.
The divergence between onshore UAE law and common law frameworks such as the DIFC and ADGM has practical and often decisive implications. In onshore jurisdictions, parties may find relief through statutory doctrines even where contractual provisions are silent or restrictive. In common law environments, the contract remains the primary, and often exclusive, source of rights and remedies. As a result, the same factual matrix may produce materially different outcomes depending on the governing law.
The legal position in the DIFC and ADGM reflects common law principles rooted in contractual certainty and party autonomy. In these jurisdictions, force majeure applies only if expressly provided for in the contract, and is interpreted narrowly. The closest equivalent to impossibility is the doctrine of frustration, which is applied restrictively and requires performance to become impossible or fundamentally different, not merely more expensive or difficult.
Increasingly, claims are no longer driven by single, identifiable events but by layered and cumulative disruptions. Practitioners are observing claims arising from a combination of factors, such as supply chain delay and inflationary pressures, rather than a single triggering event. This trend has important legal implications. It complicates reliance on traditional force majeure clauses, which are typically drafted around discrete events, and it reinforces the importance of concurrent causation analysis. In many cases, delay and disruption are attributable to multiple overlapping causes.
From a dispute perspective, evidentiary challenges have become central. Proving loss in a context of ongoing and multi-factor disruption is inherently complex. Parties must establish a clear chain of causation linking the external event to the alleged delay or cost impact, while also isolating project-specific effects from broader market conditions. Where concurrent factors contribute to a default, the party invoking force majeure bears the rigorous burden of establishing the event as the dominant or operative cause of non-performance. It is insufficient to merely identify the event as one of several contributing variables. This requires robust contemporaneous documentation, including records of delay events, cost increases, mitigation measures, and communications. Courts and tribunals, particularly in common law forums, place significant weight on such evidence.
In response, sophisticated organisations increasingly adopt structured internal risk-management mechanisms, including dedicated claims or risk task forces responsible for monitoring external developments, assessing contractual impact, preserving evidence, and coordinating claims strategy across projects. Equally important is early engagement with counterparties through timely contractual notices and proactive efforts to explore commercial solutions before disputes escalate. Parties should maintain clear records of negotiations, including meeting minutes and communications, to preserve evidentiary integrity and establish causation. Care must also be taken to protect sensitive discussions, including through the appropriate use of “without prejudice” communications where available.
Compliance with contractual and legal notice provisions remains critical. In the case of Panther Real Estate Development LLC v. Modern Executive Systems LLC [2022] DIFC CA 016, the DIFC Court emphasized that failing to meet contractual notice deadlines can act as a time-bar, preventing a party from claiming an extension of time or loss and expense, even if the work was completed.
In onshore Courts, Article 816(3) of the New Civil Code established an express statutory notice obligation for contractors where it must “immediately” notify the employer of any events or circumstances that may impede the proper execution of works. Crucially, the statute attaches a clear penalty for silence: a contractor who fails to provide due notice “bears the consequences” arising from such events. While the law remains silent on the specific form, content, or delivery method for this notice, its presence creates a statutory baseline for accountability. In practice, this may mean that even if a contract is vague regarding notification, the law now provides a default “time-bar” mechanism.
Historically, practitioners could navigate strict notice clauses by invoking general Civil Code principles such as good faith, arguing that strict enforcement of a time-bar violates the principle of good faith or abuse of right, claiming that an employer’s reliance on a technicality to avoid payment constitutes an abuse of right. It could be argued that Article 816(3) weakens these traditional counter-arguments. It is inherently difficult to characterize a contractual time-bar as an “abuse” when the statute itself now mandates notification and penalizes non-compliance. Article 816(3) only fills the gaps in contracts that lack detailed notice regimes.
In a dual legal system, combining civil law flexibility with common law certainty, effective risk mitigation requires not only careful drafting but proactive legal and organisational engagement throughout contract performance.
ABOUT THE AUTHOR
Dr. Aseel Zimmo is a Fellow of the Chartered Institute of Arbitrators. She sits as an independent international Arbitrator & Mediator and can be contacted at [email protected].
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
