Florian Herkommer July 31, 2026July 31, 2026 Commercial disruptions can affect contractual performance in different ways. A government restriction may prevent delivery, a critical asset may be destroyed, or performance may remain possible but become substantially more expensive. These situations are often described generally as force majeure. Under UAE law, however, the legal consequences depend on whether performance has become impossible or merely excessively burdensome. Force majeure and hardship are addressed under Federal Decree-Law No. 25 of 2025, Promulgating the Civil Transactions Law, which took effect on 1 June 2026. Impossibility under Article 236 of the new Civil Code Force majeure generally refers to an external event beyond the control of the contracting parties that could not reasonably have been avoided or overcome. Impossibility describes the effect of that event on the contract. It arises where the relevant contractual obligation can no longer be performed at all, rather than merely becoming more difficult, delayed or expensive. Article 236 applies where a force majeure event makes performance of a bilateral contract impossible. Where performance becomes entirely impossible, the corresponding obligations of both parties lapse, and the contract is automatically dissolved by operation of law. The threshold is strict. Performance must be prevented, rather than merely delayed, complicated or made more expensive. This may apply where: a government prohibition makes the agreed activity unlawful; the only agreed delivery location becomes inaccessible; or an import or export ban directly prevents delivery. The affected party must establish a direct causal link between the external event and the obligation that can no longer be performed. War, natural disaster, regulatory change or transport disruption will therefore not automatically release a party from its obligations. Their effect on the particular contract must be assessed. Partial and Temporary Impossibility under Article 236 of the new Civil Code Article 236 also addresses partial and temporary impossibility. Under Article 236(2), where only part of the performance becomes impossible, the corresponding part of the obligation may lapse. Either party may also apply for rescission of the entire contract where continuation of the remaining obligations is no longer appropriate. Article 236(3) applies where the impossibility is temporary in a continuous or successive contract. Depending on the circumstances, the affected obligation may lapse for the relevant period, the contract may be modified or either party may seek rescission. Therefore, a temporary disruption in a long-term supply, service or construction contract does not necessarily terminate the entire contractual relationship. Hardship under Article 224 of the new Civil Code Article 224 applies where exceptional and unforeseeable circumstances of a general nature make performance so onerous that the debtor is threatened with heavy loss. In such cases, performance remains possible, but the contractual balance has been materially disrupted. The affected party may apply to the court for relief. After balancing the interests of both parties, the court may reduce the obligation to a reasonable level or order rescission of the contract. Any agreement excluding the application of Article 224 is void. Potential examples may include exceptional increases in material prices, substantially more expensive transport routes, extraordinary insurance premiums or unexpected regulatory costs. Ordinary inflation, market fluctuations or reduced profitability will generally not be sufficient. The circumstances must go beyond the normal commercial risks assumed when entering into the contract. Available Remedies The available remedy depends on the extent and duration of the disruption. Complete impossibility may result in automatic dissolution under Article 236(1). Partial impossibility may cause the affected part of the obligation to lapse under Article 236(2). Temporary impossibility may support modification or rescission under Article 236(3). Articles 237 and 238 regulate the consequences of dissolution and rescission, including restitution of what the parties have already received. Article 249 may also exclude liability for damage arising from an external cause beyond a party’s control, including force majeure, provided that the party did not cause the event and the law or contract does not provide otherwise. Practical Considerations for UAE Businesses A party affected by a serious disruption should first identify the precise obligation concerned and determine whether performance is completely, partially or temporarily impossible, or remains possible at a substantially increased burden. The contract should be reviewed for force majeure clauses, hardship provisions, price-adjustment mechanisms, suspension rights, notice requirements and termination provisions. The impact of the event should be documented carefully. Relevant evidence may include government notices, regulatory decisions, supplier correspondence, insurance communications, cost comparisons and records of attempts to identify reasonable alternatives. Where appropriate, the parties may also consider a negotiated solution, including revised deadlines, adjusted prices, amended quantities or temporary suspension of affected obligations. Conclusion UAE businesses should not assume that delay, increased cost or operational difficulty automatically excuses performance. The contractual wording, the nature and duration of the disruption, compliance with notice requirements and the available evidence will be critical. Early legal assessment and timely engagement with the counterparty may help preserve rights and achieve a commercially workable solution before the dispute escalates.
