The ongoing regional military conflict, alongside the broader unrest affecting Gulf Cooperation Council (“GCC”) countries, has entered a protracted phase. Ceasefire talks have stalled and key maritime routes remain strategic flashpoints. Against this backdrop, Federal Decree Law No. 25 of 2025 promulgating the new Civil Transactions Law (the “CTL”) which comes into force on 1 June 2026. Whilst the CTL does not materially alter the pre-existing legal position on force majeure and unforeseen circumstances, the current environment warrants a restatement of the framework governing contractual disruption and its practical application.

The new CTL does not offer a single codified definition of “Force Majeure” but constructs the concept across several interlocking provisions, principally in Article 236, which addresses the consequences of a Force Majeure event in bilateral contracts. Where such an event renders performance impossible, the reciprocal obligations of both parties are extinguished and the contract is discharged by operation of law, without the need for judicial intervention; where performance becomes only partially impossible, the other contracting party may elect to uphold the extinction of the corresponding obligation or apply to the court for rescission; and in continuing contracts where the impossibility is temporary, the aggrieved party may seek an adjustment of terms or apply for rescission. The threshold for establishing Force Majeure is demanding: Articles 249 and 428 of the CTL require that the event constitute a “foreign cause beyond the debtor’s control”, encompassing acts of God, intervening acts of third parties, and events wholly outside the obligor’s reasonable control, and the impossibility must be absolute, a mere increase in difficulty or cost does not suffice. A party must demonstrate that performance has become objectively and legally impossible, not merely more burdensome, and in the current environment this is a high bar, as business operations across the UAE and the wider GCC continue to function, with financial markets, regulatory institutions, and transactional infrastructure all operating normally, meaning that for most contractual obligations the threshold of impossibility has not been met.

The new CTL draws a legally significant distinction between Force Majeure, which renders performance impossible, and the doctrine of Unforeseen Circumstances (the hardship doctrine), codified in Article 224. Under that Article, where exceptional and unforeseeable circumstances of a general nature arise after the conclusion of a contract, rendering performance excessively onerous and threatening extraordinary loss, the court may reduce the onerous obligation to a reasonable level or order rescission. Any agreement to the contrary is void.

The distinction between the two doctrines is fundamental and must not be conflated:

• Force Majeure (Article 236 / Article 428): Performance has become objectively impossible by reason of a foreign cause beyond the debtor’s control. The contract is discharged by operation of law. No compensation is payable. The standard is absolute impossibility.
• Unforeseen Circumstances (Article 224): Performance remains possible but has become excessively onerous due to exceptional and unforeseeable post-contractual circumstances. The court has discretion to rebalance the parties’ obligations or order rescission.

In the current geopolitical environment, this distinction carries immediate practical significance. A party whose performance has become more expensive or logistically complex, but not impossible, cannot invoke Force Majeure but may have recourse to Article 224 if the circumstances are sufficiently exceptional. Parties who conflate the two doctrines risk wrongful repudiation, exposing themselves to claims for breach and damages.

Practical Implications for Stakeholders

Stakeholders should approach the current environment with the following in mind. The legal threshold for invoking Force Majeure under the new CTL is high: without demonstrable and absolute impossibility of performance attributable to a cause beyond the obligor’s control, parties should continue to perform. A party that ceases performance without proper legal justification risks being treated as in repudiatory breach, entitling the other party to terminate and claim damages. Where performance has become significantly more onerous but not impossible, parties should consider whether the conditions for invoking Article 224 are met and should seek legal advice before taking any unilateral action. All parties are reminded of their overriding duty to perform contracts in good faith and to cooperate constructively with counterparties. Force majeure clauses in existing contracts should also be reviewed carefully, as contractual definitions may differ from the statutory framework and will generally govern where they do. War risk clauses, material adverse change provisions, and business interruption insurance coverage should all be stress tested against an extended conflict scenario.

The new CTL provides a coherent and demanding framework for assessing contractual disruption. Force Majeure requires absolute impossibility of performance attributable to a cause beyond the obligor’s control — a threshold that, for most commercial obligations in the UAE today, has not been crossed. The doctrine of Unforeseen Circumstances offers a more calibrated remedy where performance has become extraordinarily onerous, but requires judicial intervention and cannot be invoked unilaterally. Stakeholders who understand this distinction will be best placed to protect their interests and preserve their commercial relationships through this period of uncertainty.

AUTHORS

Mohammed Kawasmi is a partner in Al Tamimi & Company’s real estate practice with over 20 years’ experience across MENA. A trusted advisor to government bodies across the GCC, he specialises in real estate laws, portfolio structuring, family businesses, trusts, and real estate funds, including REITs.

Kirsty de Sousa is a senior knowledge lawyer in Al Tamimi & Company’s real estate practice with over 17 years’ experience across South Africa and the Middle East. An admitted attorney and notary, she specialises in property law and drives innovation through smart technologies and modern legal tools.