Introduction
Ongoing geopolitical tensions across the Middle East have brought renewed scrutiny to force majeure in UAE real estate transactions. While the UAE market remains resilient, indirect impacts, such as supply chain disruption, airspace restrictions, regulatory responses, and financing constraints, continue to affect performance across development, leasing, and investment structures.
Importantly, force majeure may be invoked under UAE law even in the absence of an express contractual provision. The concept arises as a matter of statute under the UAE Civil Code and operates independently of contractual drafting.
However, reliance on statutory force majeure is subject to a strict and narrow test, typically more onerous than contractual formulations.
This note outlines the legal framework and practical application of force majeure in the current environment, with reference to both contractual and statutory positions.
Legal Framework (UAE Law)
Under the UAE Civil Code:
– If performance becomes impossible, the obligation is extinguished;
– If impossibility is partial or temporary, performance may be suspended.
To qualify, the event must be:
– External to the parties;
– Unforeseeable at the time of contracting; and
– Render performance objectively impossible (not merely delayed or more expensive).
In the context of regional instability, the distinction between impossibility and hardship is critical. Disruption, delay, or cost escalation will rarely meet the statutory threshold absent a direct prevention of performance.
From a seller/landlord perspective, this high threshold offers protection against broad or opportunistic claims. From a buyer/tenant perspective, reliance on statute alone requires clear evidence of genuine impossibility.
Contractual Force Majeure
In practice, most UAE real estate contracts include bespoke force majeure provisions. These clauses typically take precedence, defining both the scope of qualifying events and the consequences of invocation.
Commonly included events in the current climate include:
– War, hostilities, or regional conflict;
– Government restrictions or regulatory action;
– Disruption to labour, logistics, or materials;
– Sanctions or financial restrictions.
The effectiveness of such clauses depends on drafting. Key variables include:
– Whether indirect effects (e.g. regional instability) are captured;
– The requirement for direct causation;
– The remedies available (suspension vs termination).
In practice, the contractual regime governs first, with statutory force majeure operating as a fallback where contracts are silent or unclear.
From a seller/landlord perspective, clauses are often drafted narrowly to preserve performance and limit termination exposure. Conversely, a buyer/tenant will seek broader wording to capture indirect disruption and secure flexibility.
Application in Real Estate Transactions
(a) Development and Construction
Regional disruption may impact materials, labour, and approvals. These typically justify extensions of time, not termination, unless performance becomes impossible. Cost increases alone will not qualify.
A developer/seller will focus on preserving timelines through extensions, while a buyer will look to enforce longstop dates and delay remedies.
(b) Leases
Tenants may seek rent relief due to operational disruption or reduced demand. However:
– Economic hardship is not force majeure;
– Relief depends on express lease provisions.
Absent clear drafting, rent obligations generally continue.
A landlord will rely on strict interpretation to enforce payment, while a tenant must anchor any relief in express contractual wording.
(c) Sale and Purchase Agreements (SPAs)
Force majeure may arise where transfers or payments are delayed due to administrative or banking disruption. The typical outcome is deferral of completion, with termination linked to longstop dates.
A seller will resist termination and favour completion, while a buyer may seek exit rights where delay becomes prolonged.
Rights and Remedies
Where established, force majeure may result in:
– Suspension of obligations;
– Extension of time;
– Termination (in cases of permanent impossibility);
– Limited restitution.
Relief is conditional on strict compliance with:
– Notice provisions;
– Mitigation obligations;
– Evidence of causation.
From a seller/landlord perspective, remedies are structured to preserve contractual continuity. A buyer/tenant will focus on flexibility, including suspension or exit where justified.
Distinction from Exceptional Circumstances (Hardship)
Where performance is not impossible, but becomes excessively onerous, and Force Majeure is not available, parties may look to the doctrine of exceptional circumstances under the UAE Civil Code. Courts may rebalance obligations, though this remains discretionary and is applied conservatively.
Practical Considerations
– Causation is key: direct linkage between event and non-performance is essential.
– Foreseeability is shifting: ongoing tensions may weaken claims in new contracts.
– Drafting matters: tailored force majeure provisions are increasingly standard.
– Procedure is critical: failure to comply with notice or mitigation requirements may defeat a claim.
In practice, a seller/landlord will adopt a narrow, compliance-driven approach, while a buyer/tenant must build a robust evidentiary position to support relief.
Conclusion
Force majeure remains a high-threshold doctrine under UAE law. While regional instability creates real disruption, relief depends on demonstrating objective impossibility, not commercial inconvenience. Contractual provisions are central, but statutory force majeure remains available even where contracts are silent, subject to stricter requirements.
Where force majeure cannot be established, the doctrine of exceptional circumstances (hardship) offers a potential alternative, allowing courts to adjust obligations in cases of excessive burden. In the current environment, careful drafting, proactive contract management, and clear risk allocation remain essential.