Hardship Under UAE Law: When Courts Can Adjust Contracts

When Contracts Become Too Difficult to Perform

Commercial contracts are often drafted with the expectation that circumstances will remain broadly stable.

But in reality, markets shift, geopolitical events occur, supply chains become disrupted, and economic conditions can change dramatically.

When such events arise, businesses may find themselves bound by contractual obligations in the UAE that are still technically possible to perform, but far more burdensome than originally anticipated.

In many legal systems, this situation offers little relief.

Under UAE law, however, the legal framework provides a unique mechanism designed to address precisely this type of situation.

The Concept of Hardship in UAE Law

Unlike the doctrine of force majeure, which applies when contractual performance becomes impossible, UAE law also recognises circumstances where performance remains possible but imposes excessive hardship on one of the parties.

This principle is derived from the UAE Civil Transactions Law, which allows courts to intervene when exceptional circumstances fundamentally alter the balance of a contract.

Where an unforeseen event occurs that makes performance oppressively burdensome, a court may reduce the affected party’s obligations to a reasonable level.

This concept is commonly referred to as the hardship doctrine or exceptional circumstances principle.

When Can Hardship Apply?

For hardship to apply under UAE law, several conditions must typically be satisfied.

First, the event must be exceptional and unforeseeable at the time the contract was concluded.

Second, the event must fundamentally disrupt the economic balance of the agreement, making performance excessively difficult for one party.

Third, the hardship must arise from circumstances beyond the control of the affected party.

Examples may include:

• sudden geopolitical disruptions affecting supply chains
• severe regulatory changes impacting operations
• unexpected logistical barriers
• significant market disruptions caused by external events

Importantly, hardship does not require that performance become impossible.

Rather, it addresses situations where the burden imposed on a party becomes disproportionate or unreasonable compared with what was originally contemplated.

Judicial Power to Adjust Contracts

One of the distinctive features of UAE contract law is the authority granted to courts to modify contractual obligations when hardship is proven.

Instead of terminating the contract, the court may:

• reduce the affected party’s obligations
• adjust contractual terms
• restore balance between the parties

The aim is to prevent severe injustice while preserving the contractual relationship where possible.

This approach reflects the UAE legal system’s emphasis on fairness and balance in contractual dealings.

How Hardship Differs From Force Majeure

The hardship doctrine is sometimes confused with force majeure, but the two concepts address different situations.

Force majeure typically applies when performance becomes objectively impossible.

Hardship applies when performance remains possible but excessively burdensome.

For example:

• If a shipping route becomes completely inaccessible due to conflict, performance may become impossible, potentially triggering force majeure.

• If the same disruption merely causes transport costs to increase dramatically, hardship may be argued instead.

Understanding this distinction is critical when businesses evaluate their contractual rights during periods of disruption.

Practical Implications for Businesses

Companies operating in volatile economic environments should carefully review their contracts to assess how risk is allocated between the parties.

Businesses should consider:

• whether contracts contain hardship clauses
• how force majeure provisions are drafted
• whether renegotiation mechanisms exist
• how risk is distributed between contracting parties

Where hardship arises, early legal advice and negotiation may help parties reach a practical solution before disputes escalate.

How Al Kabban & Associates Can Assist

Al Kabban & Associates advises businesses on contractual risk management, commercial disputes, and regulatory developments affecting business operations in the UAE.

Our services include:

• contract drafting and review
• hardship and force majeure analysis
• dispute resolution and litigation
• commercial risk advisory

Conclusion

While many legal systems provide limited relief when contracts become economically burdensome, UAE law recognises that exceptional circumstances may require judicial intervention.

The hardship doctrine reflects a legal philosophy that seeks to preserve contractual relationships while ensuring fairness when unforeseen events fundamentally disrupt commercial expectations.

Understanding how this doctrine operates can be crucial for businesses navigating uncertain economic environments.