United Arab Emirates: Can Covid-19 be considered as a Force Majeure event under UAE Civil Law?

published 16 April 2020 | reading approx. time 3 minutes

As it may be assumed, the term Force Majeure has its origin in the French jurisdiction. To briefly summarize the meaning of the term - Force Majeure means nothing less than an act of god. In the past, this indeterminate legal concept has been applied to circumstances such as earthquakes, volcanic eruptions, floods, heat waves and other natural disasters. Since the term is widely interpretable and therefore dynamic it has been adopted to further circumstances like wars, riots, and unexpected legislation. Being an indeterminate concept, there is no exhaustive list of Force Majeure events under the UAE law. Due to the current situation caused by the new Covid-19 (Coronavirus), we have taken this opportunity to evaluate the concept of Force Majeure and how it could apply to existing and new contracts with suppliers or customers.

What is the legal basis to consider the Force Majeure event ?

A Force Majeure event may be applied on a contractual basis, if the contract provides for it. However, there are cases, where Parties to a contract have not considered to include the Force Majeure term. In cases where the contract does not foresee such a clause, the Party claiming such unbearable burden may rely on Art. 273 of the UAE Civil Law (Federal Law No. 5 of 1985). Article 273 of the UAE Civil Law states as follows:

“In bilateral contracts, if a force majeure arises that makes the performance of the obligation impossible, the corresponding obligation shall, be extinguished and the contract ipso facto rescinded.

If the impossibility is partial, the consideration for the impossible part shall be extinguished. This shall also apply on the provisional impossibility in continuous contracts. In both instances the creditor may rescind the contract provided the debtor has knowledge thereof.”

Article 273 of the UAE Civil Law requires cumulatively the following circumstances to exist:

Bilateral contract; and
Force Majeure event; and
Impossibility (physical or legal) of the performance of the contractual obligation; and
Impossibility must be a result of the Force Majeure event.

As a general rule, UAE courts consider the applicability of the Force Majeure event to a contract only, where the relevant event was unforeseeable, unavoidable and uncontrollable.

What are the consequences of applying the Force Majeure rule?

In cases where the Force Majeure event is applicable, the contract is deemed to be rescinded by law. As a consequence, each contractual party is considered to be in their pre-contractual position, additionally damages are to be awarded to restore the parties’ positions, if possible.

Adjustment of contractual obligations under Art. 249 of UAE Civil law

Force Majeure has to be clearly distinguished from Art. 249 UAE Civil Law, which states:

“If public exceptional unpredictable circumstances shall arise, and their happening has resulted in making the execution of the contracted obligation, if not impossible, has become burdensome to the debtor in such a manner as to threatening him with heavy loss, the judge may, according to circumstances and by comparing the interests of both parties, reduce the burdensome obligation to reasonable limits, if justice so requires. Any agreement to the contrary is void.”

A party may rely on Art. 249 UAE Civil Law in cases were Force Majeure requirements are not met. Article 249 does not require a legal- or physical impossibility of an obligation but requires the obligation under a contract to become an intolerable burden for one of the parties.

What are the consequences of applying Art. 249 to a contract?

Provided the criteria of Art. 249 of the UAE Civil Law are met, the party relying on such circumstances may ask the court to modify the contractual obligation which became an unbearable burden to a party in order to reduce heavy losses.

One question remains - May Coronavirus be considered a Force Majeure event?

At this point it needs to be clearly mentioned that the law itself does not provide an answer to that question since there is no general answer in this regard. The eligibility to apply the Force Majeure event will be decided on a case by case basis. We have learned that the Force Majeure Event should in general be unforeseeable – as a consequence courts may look at the time the contracts have been concluded. Courts may also take into consideration the official announcement of Covid-19 of the World Health Organization (WHO) which firstly made Corona public on 31st of December 2019.