Force Majeure and its Impact on Contractual Liability and Exemption from Compensation in UAE Law

Force Majeure and Its Effect on Contractual Liability and the Extinguishment of Compensation under UAE Law

 

Force majeure is considered one of the most significant legal principles addressing situations where an exceptional event occurs that renders the performance of a contract impossible. Where such an event arises and its conditions are satisfied, liability is extinguished, and the debtor is not obligated to pay compensation.

 

The UAE legislator has regulated this principle under Articles (273) and (472) of the Civil Transactions Law of 1985. It has also been addressed by the judiciary in numerous rulings to define its meaning and establish the criteria governing its application. The following is a simplified overview of the concept of force majeure, its conditions, and its legal effect.

 

First: Definition of Force Majeure

Force majeure refers to an exceptional external event that is unforeseeable and unavoidable, and which renders the performance of the obligation impossible.

 

The Abu Dhabi Court of Cassation has clarified that force majeure does not merely mean that the performance of the contract has become difficult or burdensome; rather, it must amount to complete impossibility of performance. (See: Appeals Nos. 699, 700, and 713 of 2023 – Commercial, Session dated 14/09/2023)

 

Accordingly, if the performance of the contract remains possible, even if accompanied by hardship, this does not constitute force majeure, but may instead fall under the doctrine of exceptional circumstances.

 

Second: Key Conditions of Force Majeure

The mere occurrence of an event is not sufficient for it to be considered force majeure; rather, several essential elements must be satisfied:

1. The event must have been unforeseeable at the time the contract was concluded, meaning it was not within the contemplation of the contracting parties. If the event is ordinary or could reasonably have been anticipated, it does not constitute force majeure.

 

The courts have held that certain natural phenomena, such as ordinary rainfall or typical winds, do not qualify as force majeure where they are normal and foreseeable.

 

2. The event must be unavoidable, meaning it cannot be prevented nor its effects mitigated despite the exercise of reasonable care. If the damage could have been avoided or its consequences reduced, force majeure will not be established.

 

3. The cause of the event must be external to the contracting parties. Accordingly, the debtor must not have caused or contributed to the occurrence of the event.

 

4. It is also required that the debtor must not have been in delay in performing their obligation due to their own fault prior to the occurrence of the event.

 

If the debtor was already in default at the time the event occurred, they may not invoke force majeure as a defense.

 

5. A key requirement in the application of force majeure is that the party invoking it must promptly notify the other party upon becoming aware of the exceptional event, specifying its impact on the performance of the obligation.

 

The purpose of such notification is to enable the other party to understand the circumstances preventing performance and to take any necessary measures.

 

Accordingly, unjustified delay in providing such notice may weaken reliance on force majeure or raise doubts as to the validity of the claim, particularly where failure to notify results in the aggravation of damage or the loss of an opportunity to mitigate it.

 

Third: Distinction Between Force Majeure and Exceptional Circumstances

The law distinguishes between two different situations:

Force majeure renders the performance of the obligation completely impossible.

In contrast, exceptional circumstances (hardship) make performance burdensome and difficult, but still possible. In such cases, the court may intervene to adjust or mitigate the obligation.

 

Fourth: Effect of Force Majeure on the Contract

Where force majeure is established and its conditions are satisfied, it gives rise to several significant legal effects, most notably:

• Automatic termination of the contract by operation of law where performance becomes totally impossible;

• Discharge of the debtor from the obligation and the extinction of their liability;

• The creditor is not entitled to compensation. This is because the debtor is not at fault for the non-performance; rather, performance has become impossible due to an event beyond their control.

 

It is evident from the foregoing that force majeure is not merely an ordinary event; rather, it is an exceptional, unforeseeable, and unavoidable event that renders the performance of the obligation impossible. Upon its occurrence, the obligation is extinguished, liability ceases, and the debtor is not required to pay compensation.

 

For this reason, UAE courts exercise strict scrutiny when assessing the conditions of force majeure prior to its application, to ensure that it is not misused as a means of evading contractual obligations without legitimate justification. Accordingly, a debtor who is prevented from performing their obligation due to a force majeure event should review the force majeure clause in the contract and promptly notify the creditor of the impossibility of performance in accordance with the contractual provisions, in order to be relieved from performing the obligation or paying compensation.