Last updated on December 21st, 2020 at 10:05 am
Article 273 of the Civil Transactions Law Number 5 of 1985 in the United Arab Emirates specifies the following:
- in bilateral contracts, if a force majeure arises then it 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 The corresponding obligation shall be extinguished and the contract ipso facto rescinded.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 this 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.
Whilst the law does not contain a definition of what constitutes a force majeure event. It is generally accepted that they are limited to unexpected events. In particular natural disasters and occasionally, also extend to war, civil unrest and political disturbance. Although coronavirus outbreak considered as force majeure event. and would depend on the particular circumstances of the case, facts, business and sector, but there is definitely potential to argue that in certain circumstances the outbreak could be considered a force majeure event.
In the event, the work contracts or activities are not directly or wholly impacted by coronavirus. The obligations will continue and remain effective as the force majeure event does’nt apply to the nature of the activity. Because of the availability of all components necessary for both parties to implement their contractual commitments.
If the event makes the execution of the contract in relation to one or both parties impossible, the law automatically annulled the contract, and considered non-existent as a result of the subsisting force majeure event.
If the effect is temporary, then it may be possible to perform part of the contract and not the rest of the contractual obligations. In this scenario, part of the contract, may be removed and/or suspended, while the other part, which is possible to perform, shall continue.
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