I. Introduction — What Is Actually Happening?
Imagine you run a business in the UAE. Your goods are stuck. The Strait of Hormuz, the narrow waterway through which roughly one-fifth of the world’s oil passes has been temporarily closed. Airspace restrictions are in force across multiple Gulf states. Your shipping routes are disrupted. Your supply chain is under serious pressure. Your counterparty is demanding delivery. Your lawyer’s phone is ringing.
The first question everyone asks is: “Can we declare force majeure?” The honest answer is: probably not, at least, not in the way most people think. Force majeure is a French term meaning “superior force”. It dates back to the Napoleonic Code of 1804. Under UAE law, it has a very specific, and very high, threshold. It requires absolute impossibility of performance. Not difficulty. Not delay. Not extra cost. Impossibility. And if you get it wrong, the consequences are serious. However, there may be potential reliefs at law.
This article breaks down what UAE law actually says whether there is an alternative doctrine (hardship) what the courts have decided in past crises, and most importantly what you should be doing right now to protect your business.
II. The Law — What Does Force Majeure Actually Mean in the UAE?
2.1 Where Does It Come From?
Force majeure in the UAE is governed primarily by the Civil Transactions Law — Federal Law No. 5 of 1985 (the “1985 Civil Code”), which has formed the backbone of UAE contract law for over forty years.
On 30 December 2025, the UAE enacted Federal Decree-Law No. 25 of 2025 (the “New Civil Transactions Law”), which will come into force on 1 June 2026. Until then, the 1985 Civil Code remains in force. The new law largely preserves the existing framework.
2.2 The Four Tests You Must Pass
Article 273 is the central provision. It provides that where a force majeure event renders performance impossible, the relevant obligation is extinguished and the contract terminates automatically.
Article 287 complements this by confirming that a party is not liable for loss caused by events beyond its control, including natural disasters, sudden accidents, force majeure, or third-party acts.
Where impossibility is partial or temporary, only the affected part of the obligation is discharged, the remainder of the contract continues.
The key point, however, is how strictly these provisions are applied: UAE courts require all of the following elements to be satisfied:
- The event must be genuinely beyond the party’s control i.e its effects could not have been avoided, even with reasonable efforts;
- It must not have been reasonably foreseeable at the time of contracting; and
- It must directly prevent performance.
Fail on any one of these, and the claim will fail.
There is an additional, often overlooked requirement: the event must be the sole cause of non-performance. If the party contributed in any way, even marginally, the defence may be rejected entirely.
2.3 “But It Is Costing us a Fortune” — Why That Is Not Enough
This is where most businesses trip up. They assume that because something has become extremely expensive or difficult, they can invoke force majeure. They cannot. Article 273 requires absolute impossibility not hardship, not increased cost, not reduced margins. UAE courts have limited this to situations of physical or legal impossibility: for example, the destruction of the subject matter, or a government order making performance unlawful.
As such, if performance remains technically possible, just ruinously expensive, what can you do? That is where a different legal tool comes in: the hardship doctrine under Article 249.
III. Force Majeure vs. Hardship
3.1 Hardship: When Performance Becomes Crushing
Article 249 of the 1985 Civil Code addresses a fundamentally different situation. It applies when something extraordinary and unforeseeable happens, something of a public nature, that makes performance so crushingly expensive that it would cause the performing party grave loss. In that case, a court can step in and reduce the obligation to a reasonable level. Here is the important part: you cannot contract out of this. Any clause that tries to exclude Article 249 is void. It is a matter of public policy.
This reflects the civil law concept of “imprévision” the idea that contracts should be adjusted, not abandoned, when circumstances fundamentally shift.
To succeed, three conditions must generally be established:
- The event is of a general public nature;
- It was unforeseeable at the time of contracting; and
- It creates a serious economic imbalance causing grave loss.
3.2 What is the relief provided if Hardship can be demonstrated?
Where hardship is established, the relief available is a matter of judicial discretion. Under Article 249, the court (or arbitral tribunal) may adjust the onerous obligation to a reasonable level, whether by reducing the scope of the obligation itself or by increasing the remuneration payable to the performing party. The aim is not to relieve a party of its bargain entirely, but to restore a measure of fairness to the contractual relationship. In this sense, the remedy operates in a manner similar to equitable compensation: it acknowledges that the burden has shifted disproportionately onto one party and seeks to redistribute it in a way that is just and proportionate in the circumstances.
3.3 Why This Distinction Matters — A Lot
Think of it this way. Force majeure (Article 273) is a sledgehammer, it kills the contract entirely, but only if performance is truly impossible. Hardship (Article 249) is a scalpel, it keeps the contract alive but adjusts it to make it fair.
The causation test is different too. For force majeure, the event must be the sole cause of your inability to perform. For hardship, you only need to show the event made performance excessively burdensome. And procedurally, force majeure operates automatically by law, whereas hardship requires you to go to court (or an arbitral tribunal) and ask a judge to adjust your obligations.
The bottom line? If your business is being hit by the current regional disruption, you are far more likely to get relief under Article 249 (hardship) than Article 273 (force majeure), unless you can genuinely show that performance is impossible. UAE courts prefer to save contracts, not destroy them. They will adjust obligations to restore fairness, consistent with the duty of good faith under Article 246 of the Civil Code.
In the next part, we will examine what past crises can teach us about how UAE courts approach these issues in practice, and the steps businesses should be taking right now.
Seek Legal Counsel
For further information or advice in relation to any of the matters addressed above, please feel free to contact the Corporate team at Habib Al Mulla & Partners.
Disclaimer
The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.