In business, planning is rarely about certainty; it is about managing disruption. Parties can allocate many risks in contracts and long-term arrangements, and they can usually protect themselves against the other side’s non-performance through clear remedies, securities, and enforcement mechanisms covering many of the everyday “what ifs”. What is harder to “contract away” is the category of events that no one truly controls. And that is where the essential “what if” question arises: what if performance is disrupted by circumstances beyond either party’s control – force majeure, or hardship?
The starting point is to separate the two concepts, because they deal with different realities: one is triggered when performance becomes impossible, the other when performance remains possible but becomes unfairly burdensome. Force majeure is about impossibility: an unforeseen event occurs, beyond a party’s control, and its effects cannot be avoided, making performance objectively impossible. Hardship is about extreme burden: performance remains possible, but exceptional and general events unforeseeable at the time of contracting make it so onerous that it threatens the debtor with serious loss, which is where the court may intervene to restore balance.
That distinction is not theoretical; it drives the outcome. With force majeure, once impossibility is established, the obligation falls away because performance can no longer be required; in bilateral contracts, the corresponding obligation falls away as well, so the contract may be treated as terminated by operation of law to the extent performance has become impossible. It also reshapes liability: where the external event is truly the only cause of the damage, the chain of causation is broken and liability does not arise. Hardship runs in the opposite direction. It is not meant to end the deal, but rather a mechanism to keep it standing, allowing the court, after balancing the parties’ interests, to ease the excessive burden so the contract can continue on terms that remain fair and workable.
Contract drafting can allocate risk, but not in the same way for both concepts. With force majeure, parties have room, within legal limits, to agree in advance who bears the consequences, including whether the affected party will remain responsible for compensation despite the occurrence of a force majeure event—an approach consistent with Article 287 of the UAE Civil Transactions Law, which provides that: “If a person proves that the damage arose from an external cause in which he had no part—such as an act of God, a sudden event, force majeure, the act of a third party, or the act of the injured person—he shall not be liable for compensation, unless the law or the agreement provides otherwise.”
Hardship is different: it reflects a mandatory fairness principle, and parties cannot validly exclude the court’s power to rebalance an obligation that has become excessively burdensome due to exceptional events—an approach expressly reflected in Article 249 of the UAE Civil Transactions Law, which provides that: “If exceptional public events occur which could not have been foreseen, and their occurrence results in the performance of the contractual obligation—although not impossible—becoming onerous for the debtor such that it threatens him with serious loss, the judge may, depending on the circumstances and after balancing the interests of the two parties, reduce the onerous obligation to a reasonable level if justice so requires; and any agreement to the contrary shall be void.”
It is also important to note that the classification whether the situation amounts to force majeure or hardship is not decided by the way parties describe it. The analysis is fact-driven and sits within the court’s discretion. The court will focus on what actually happened, whether it could reasonably have been foreseen or avoided, how it affected performance in practice, and whether it truly caused the delay or loss. Where the court’s reasoning is sound and supported by the documents on file, its assessment will generally stand.
The practical lesson is straightforward: force majeure and hardship are not just words; they are legal terms with different definitions and different outcomes. It is critical to understand that difference early, because real risk management is not only about drafting for the “main scenario,” but about having a wider view of probabilities and how they interact. Another “what if” question remains especially important: what if a party is already in serious delay, and then the unforeseen event happens?
Disclaimer
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