When External Events Disrupt Business

Periods of regional uncertainty often place businesses in difficult contractual positions.

Supply chains may be disrupted. Shipping routes can become unpredictable. Airspace restrictions or government measures may affect logistics, trade, and operational continuity.

In such circumstances, companies frequently begin asking a critical question:

Can external events relieve us from our contractual obligations?

This is where the legal concept of force majeure becomes highly relevant.

What Is Force Majeure?

Force majeure is a legal principle that allows a party to be relieved from contractual obligations when performance becomes impossible due to events beyond the party’s control.

These events are typically extraordinary and unforeseeable, such as:

• war or armed conflict
• natural disasters
• government-imposed restrictions
• major infrastructure disruptions
• certain public emergencies

However, the application of force majeure is rarely automatic.

Whether a party can rely on force majeure depends on both the wording of the contract and the applicable law governing the agreement.

Force Majeure Under UAE Law

In the UAE, the legal framework governing force majeure is largely derived from the UAE Civil Transactions Law.

Under this law, if an unforeseeable event makes performance completely impossible, the corresponding contractual obligation may be extinguished.

Where only part of the obligation becomes impossible, that portion may be cancelled while the remainder of the contract continues to operate.

The courts ultimately determine whether the event genuinely qualifies as force majeure based on the facts of the case.

The Importance of Contract Wording

In many commercial agreements, the force majeure clause itself plays a decisive role.

Contracts may specify the types of events that qualify as force majeure, such as:

• war or hostilities
• government actions
• port closures
• transport interruptions
• supply chain failures

If a relevant event falls within the clause, the affected party may be entitled to:

• suspend performance
• extend deadlines
• renegotiate terms
• terminate the contract in extreme cases

However, if the clause is drafted narrowly, parties may find it more difficult to rely on force majeure.

Can Economic Hardship Qualify as Force Majeure?

A common misconception is that financial difficulty or market instability automatically constitutes force majeure.

In most cases, this is not sufficient.

Force majeure typically requires objective impossibility of performance, not merely that the contract has become less profitable or more difficult to perform.

For example:

• increased costs
• reduced market demand
• currency fluctuations

These situations alone generally do not meet the legal threshold for force majeure.

However, UAE law does recognise a separate doctrine that addresses situations where performance becomes excessively burdensome rather than impossible.

This concept is often referred to as exceptional circumstances or hardship, which will be explored further in the next article in this series.

Practical Steps for Businesses

Companies operating in uncertain environments should take proactive steps to understand their contractual exposure.

This includes:

• reviewing force majeure clauses in key contracts
• assessing whether current events fall within contractual definitions
• documenting disruptions affecting performance
• communicating with counterparties early
• seeking legal advice before invoking force majeure

Attempting to rely on force majeure improperly may expose businesses to claims for breach of contract and damages.

Why Legal Advice Is Critical

Force majeure disputes often arise during periods of economic or geopolitical disruption.

Because each contract contains unique language and commercial contexts differ significantly, determining whether force majeure applies requires careful legal analysis.

Businesses that take a strategic approach to contractual risk management are better positioned to protect their interests while maintaining commercial relationships.

Conclusion

In times of regional uncertainty, businesses often look to contractual mechanisms such as force majeure to manage risk.

However, the doctrine is not a universal escape from contractual obligations.

Understanding the legal framework governing force majeure under UAE law is essential for businesses seeking to navigate disruption while maintaining compliance with their contractual commitments.

How Al Kabban & Associates Can Assist

Al Kabban & Associates advises businesses and investors on complex contractual disputes, regulatory compliance, and commercial risk management in the UAE.

Our legal services include:

• contract drafting and review
• force majeure and hardship analysis
• commercial dispute resolution
• strategic legal advisory for businesses operating in the region

For businesses seeking guidance, Al Kabban & Associates, with over 30 years of experience in UAE law and recognition by Legal 500, stands ready to help corporations build resilience against legal risks while ensuring compliance with local and international standards. For more information or to schedule a consultation, contact us at +971 4 453 9090 or visit www.alkabban.com. You can also follow us on social media for more updates on everything law related in the UAE: @Alkabban_Law