Article originally published in Issue 3 of ThoughtLeaders4 Middle East Magazine, co-authored with Martin Khoshdel, Barrister, 33 Chambers.
Regional conflict, sweeping trade tariffs, disrupted supply chains and sanctions are testing businesses which operate across the Middle East and beyond. When a party cannot perform its obligations under a commercial contract, the choice of law governing the contract and key contract clauses allocating risk will determine the relief available, including whether a party can rely on force majeure, frustration or hardship. Unsurprisingly, the boundaries are being tested in litigation.
Force majeure, frustration and hardship
The contractual choice of law is crucial to determining the implications of contractual disruption. Focussing on England and Wales, DIFC, ADGM and the UAE Civil Code in particular, the laws on force majeure, frustration and hardship differ.
In England and Wales and the ADGM (which directly applies English common law) force majeure is not a free-standing doctrine. It exists only if the parties have written it into their contract, and the courts construe clauses strictly in accordance with their terms. Typically, such clauses will provide for certain events outside a party's control to excuse or modify expected levels of performance and tend to include certain notice requirements and steps to mitigate the impact of the force majeure event. Where there is no force majeure clause (or any other relevant contractual risk allocation), parties are left with frustration, a narrow common law doctrine that discharges a contract only where performance has become impossible, illegal or radically different from what was contemplated due to an event beyond the parties' control. Mere increased cost or inconvenience will not do. English law has no general concept of hardship.
If a contract governed by DIFC law contains a force majeure clause, then that will likely be interpreted with reference to English law and other common law jurisprudence. In the absence of such clause, Article 82 of DIFC Contract Law excuses non-performance caused by an unforeseen impediment beyond a party's control, but expressly not where the obligation is "a mere obligation to pay". There is no principle of frustration in DIFC law.
Looking at the onshore position, the UAE Civil Code has been updated from 1 June 2026 to modernise the law, with a new Article 236 providing that a contract will be dissolved in the event that a contractual obligation becomes impossible due to a force majeure event. If performance becomes impossible in part, a party can treat that part as having lapsed or ask the court to rescind the contract. A separate doctrine of hardship (Article 249 of the previous UAE Civil Code and Article 224 of the new UAE Civil Code) allows relief where performance remains possible but has become excessively burdensome, with the court empowered to adjust the bargain. There is a degree of flexibility afforded to the court or arbitrator, albeit before exercising their discretion they would need to be satisfied that the debtor would sustain heavy loss. This may be compared to the English law position which is that a 'hardship' principle is not recognised at all, with the Courts being very reluctant to interfere with the parties' bargain.
Developments of note
The boundaries of these rules have unsurprisingly been the subject of recent dispute.
The DIFC Court of Appeal's decision in The Collection Club Restaurant Limited v MAG Development Services Limited [2026] DIFC CA (24 April 2026) is the first appellate guidance of its kind from the DIFC on force majeure. The retail tenant in this case had defaulted on rent payments on a high-value lease, then sought to rely on the subsequent Dubai floods to invoke force majeure to excuse payment. The lease agreement did not contain an express force majeure clause and consequently the tenants sought to invoke statutory force majeure under Article 82 of the DIFC Contract Law. The Court of Appeal confirmed that an obligation to pay rent is a "mere obligation to pay" outside the protection of Article 82, closing off an attempt to use force majeure tactically as a route out of a payment obligation and providing clarity on the meaning of this phrase. Statutory force majeure would only apply if the obligation is not a 'simple' obligation to pay. Therefore, if there had been a payment obligation by one party which is connected to or accompanied by any other obligation on that same party, then it would be arguable that statutory force majeure could apply, though as always much would depend on the circumstances of the case. Although the factual context of the case concerned lease agreements, the principles considered have general application in DIFC law governed contracts which do not contain force majeure clauses. It was also confirmed by the DIFC Court of Appeal that English law frustration was a distinct principle different to that of force majeure. Moreover, as the DIFC Contract Law was a complete law, and did not encapsulate the doctrine of frustration, the DIFC Court of Appeal stated in obiter that there would be difficulties in establishing that the principle of frustration would have any application in DIFC law.
A key case of note in England and Wales is the Supreme Court's decision in RTI Ltd v MUR Shipping BV [2024] UKSC 18. A shipowner and charterer had agreed monthly shipments with payment due in US dollars. When the charterer's parent was hit by US sanctions, dollar payment became difficult. The shipowner served a force majeure notice. The charterer offered to pay in euros and cover any conversion costs, which the shipowner refused. The force majeure clause required the affected party to use reasonable endeavours to overcome the impact of the event. The Supreme Court held that reasonable endeavours to overcome a force majeure event do not require a party to accept non-contractual performance absent clear wording to that effect: insisting on the agreed contract terms is neither unmeritorious nor unjust, and forcing parties to accept workarounds would introduce uncertainty and undermine the expectations of reasonable business people. The decision is a stark reminder that, under English law, the bargain as written holds.
Concluding thoughts
The divergent approaches to force majeure, frustration and hardship across jurisdictions underscore the critical importance of careful drafting when entering into cross-border commercial contracts. Parties should give close consideration to the governing law of their agreements and ensure that force majeure clauses are sufficiently comprehensive and tailored to their specific circumstances, particularly given the narrow interpretation such clauses receive in common law jurisdictions. Where a contract is silent on these issues, the available relief will depend entirely on the applicable law. In an era of heightened geopolitical and economic uncertainty, proactive risk allocation through well-drafted contractual provisions is not merely advisable – it is essential.
