News

Legal considerations for businesses revisiting contractual obligations

Recent geopolitical developments in the UAE and the wider Gulf region have prompted businesses operating across the GCC to take a closer look at the resilience of their contractual frameworks. While the tensions linked to the Iran-US-Israel conflict have drawn attention to potential impacts on aviation routes, logistics networks and cross border commercial activity, the region continues to operate as a major hub for investment, trade and project development. In this context, the situation has naturally renewed interest in the concept of Force Majeure and the extent to which such events may affect contractual obligations.

Many companies are reviewing existing agreements and, in some cases, considering adjustments to Force Majeure provisions in newly negotiated contracts in order to account for potential disruptions.  While such reviews are common, it remains important to recall that Force Majeure is a narrowly interpreted legal principle under UAE law and cannot be invoked as a general mechanism to avoid contractual performance. Its application is governed by specific legal conditions and remains subject to careful judicial scrutiny.

Force majeure is a well established concept in civil law systems. It generally refers to an event that is external to the parties, unforeseeable at the time of contracting, and unavoidable in its consequences, such that it renders the performance of a contractual obligation impossible.

Under UAE law, the doctrine of force majeure was embedded in the Civil Code (Federal Law No. 5 of 1985) (the “Old Law”), which has now been repealed and replaced by the new Civil Transactions Law (Federal Decree-Law No. 25 of 2025) (the “New Law”), due to enter into force on 1 June 2026. While the New Law modernises the UAE’s civil law framework, it largely preserves the existing treatment of force majeure and exceptional circumstances.

Under the Old Law, these doctrines were reflected primarily in Articles 273 and 249, which distinguished between situations where contractual performance becomes impossible and those where performance remains possible but excessively onerous. The New Law, notably through Articles 236 and 249, maintains the same conceptual approach, confirming that force majeure remains grounded in the notion of objective impossibility of performance resulting from circumstances beyond the parties’ control.

In practice, UAE courts require a clear causal link between the alleged force majeure event and the impossibility of performance, meaning that the event must constitute the decisive factor preventing the contractual obligation from being fulfilled. Where performance remains possible but becomes excessively burdensome due to exceptional public circumstances, Article 249 allows courts or arbitral tribunals to adjust the obligation to a reasonable level in order to restore the contractual balance. As a result, although the New Law reinforces the importance of contractual autonomy, courts will continue to retain broad discretion when assessing whether the conditions of Force Majeure are satisfied.

Importantly, the concept of Force Majeure exists independently of contractual drafting. As it is embedded in the Civil Code, it may be invoked even where a contract does not expressly include a Force Majeure clause, provided the legal conditions are met. Its application will again depend on the specific factual circumstances of each case and remain subject to the court’s discretion.

In the current regional environment, businesses are increasingly assessing whether geopolitical developments may affect the performance of their contractual obligations. While certain sectors may face operational challenges, particularly those dependent on international transportation routes, supply chains, personnel mobility or cross border logistics, the potential impact extends to a broader range of contractual engagements, including long term commercial arrangements, investment transactions and project delivery commitments. As a result, contractual counterparties are paying closer attention to transaction timelines, delivery obligations and the allocation of risk within their agreements.

This has led some parties to consider expanding the contractual definition of Force Majeure, occasionally incorporating broad references to geopolitical instability or security risks. While parties remain free to define Force Majeure events contractually, the drafting of such provisions requires careful consideration. Overly broad or vague definitions may create uncertainty regarding their enforceability. In practice, courts will generally examine whether the event in question constitutes a genuine impediment to performance rather than a mere commercial inconvenience or increase in costs.

Force Majeure should therefore not be understood as a catch all mechanism for contractual non performance. Even where contracts contain express Force Majeure clauses, courts typically examine whether the event was genuinely unforeseeable, whether it was beyond the control of the parties, whether it directly prevented the performance of the obligation and whether the party invoking the clause took reasonable steps to mitigate its impact. Past experience demonstrates that courts and arbitral tribunals tend to approach such assessments in a careful and fact specific manner.

The experience of the COVID-19 pandemic illustrates this approach. Although the pandemic was widely recognized as an extraordinary global event, courts nevertheless evaluated Force Majeure claims on a case by case basis, focusing on the specific contractual obligations involved and the actual impact of the disruption on performance. A similar analytical framework may apply in the present context. While regional developments may influence operational conditions in certain sectors, the existence of geopolitical tensions alone does not automatically constitute Force Majeure. Each situation must therefore be assessed individually in light of the contractual provisions and the factual impact of the event on performance.

Against this legal backdrop, careful contractual drafting remains essential. Businesses should ensure that Force Majeure clauses are tailored to the operational realities of their sector and clearly identify the events that may trigger the mechanism. Contracts should also address the duration of a potential Force Majeure situation, the adjustments that may apply to contractual obligations during that period and the solutions available if the disruption continues for an extended time. In practice, agreements may provide for temporary suspension of certain obligations, adjustments of delivery timelines, partial performance of supply commitments or temporary modifications to payment structures.

Equally important is the obligation of the affected party to take reasonable measures to mitigate the consequences of the disruption. This may include exploring alternative suppliers, adapting logistics arrangements or implementing operational contingency plans. In addition, most contracts require the affected party to notify its contractual counterparties within a specified timeframe if Force Majeure is invoked. Compliance with such notification requirements is essential, as failure to follow the agreed procedure may prevent the party from relying on the clause.

Periods of geopolitical evolution often encourage businesses to revisit contractual frameworks and ensure that risk allocation mechanisms remain aligned with operational realities. The current regional environment therefore offers an opportunity for companies to review their agreements, confirm that Force Majeure clauses are clearly drafted and ensure that contractual obligations remain appropriately structured.

Ultimately, the real challenge rarely lies in invoking the concept of Force Majeure itself, but in understanding the legal conditions governing its application. When agreements are carefully drafted and supported by proactive communication between contractual partners, businesses are well positioned to navigate evolving circumstances while preserving the continuity and stability of their commercial relationships.