In an increasingly interconnected and complex economy, contractual resilience is no longer merely a matter of achieving better legal drafting; it has become a strategy for business continuity and commercial risk management. A geopolitical crisis does not need to render performance of a contract impossible in order to materially affect the commercial arrangement; performance may remain technically possible, but may no longer be commercially viable in the manner contemplated by the parties when the contract was entered into.
Consider, for example, a company that booked a hotel in Dubai several months in advance for an international conference, with rooms and a conference hall reserved and part of the fees already paid, followed by geopolitical disruptions affecting air travel. Participants begin cancelling their attendance, supply chains are disrupted, and costs increase. Although the contract remains capable of being performed, the commercial circumstances on which the agreement was based have changed materially.
This scenario is not limited to the hospitality sector. An industrial company may face difficulties in obtaining essential components, a distribution company may experience disruption to shipping, a construction company may encounter shortages of materials and increased costs, or a technology company may face difficulties accessing cross-border services.
This highlights the distinction between impossibility of contractual performance and performance remaining possible but involving a material change in the commercial burden. The effects of geopolitical disruptions may extend to transportation, supply chains, insurance, financing and labour, even where the company’s business activities continue in the ordinary course.
Accordingly, the legal question is not merely whether a crisis has occurred, but what effect it has had on the contractual obligation: has performance become impossible? Or has it become temporary or partial? Or does performance remain possible but has become materially onerous?
This distinction is important because the legal consequences differ depending on the nature of the circumstances. Under the UAE Civil Transactions Law, Article 224 of Federal Decree-Law No. 25 of 2025 provides that where exceptional and unforeseeable general circumstances render performance of an obligation onerous for the debtor and threaten him with substantial loss, the court may, after balancing the interests of the parties, reduce the onerous obligation to a reasonable level or terminate the contract.
The importance of this provision lies in its connection with the doctrine of unforeseen circumstances, under which contractual performance may remain possible while the circumstances prevailing at the time the contract was concluded change in such a manner that insisting on the original contractual terms would produce a result that the parties had not contemplated when entering into the contract.
The Dubai Court of Cassation has confirmed that the application of the doctrine of unforeseen events or force majeure requires the occurrence of an exceptional event, including that the event was unforeseeable and that its effects could not be prevented, the existence of a causal connection between the event and the non-performance of the obligation, and that the delay was not attributable to the debtor’s fault, pursuant to its judgment dated 5 July 2022 in Appeals Nos. 219 and 224 of 2022 – Real Estate Appeals.
Nevertheless, a mere increase in costs or a reduction in profitability is not, in itself, sufficient to obtain legal relief. Article 224 does not constitute a general protection against commercial risks; rather, it requires exceptional and unforeseeable circumstances that threaten to cause substantial loss.
Companies should therefore not wait until performance becomes impossible or a dispute arises before the courts. In the conference example, rooms may have already been reserved, payments made, and suppliers may have incurred costs, while travel arrangements have become unstable. At this stage, the parties need to take practical steps rather than wait for the legal position to be determined.
The same issue may arise across other sectors. An industrial company may need to identify an alternative supplier, a construction company may need to source alternative materials, a distribution company may need to reroute shipments, and a technology company may need to put alternative service arrangements in place.
This is where the distinction between legal relief and commercial flexibility becomes particularly important. Legal relief addresses the consequences of contractual disruption, whereas contractual flexibility enables the parties to manage the disruption before the commercial relationship breaks down.
Rethinking Force Majeure and Exceptional Circumstances Clauses
Force majeure clauses are often viewed as mechanisms allowing a party to exit a contract when an exceptional event occurs. This framework is essential where performance becomes impossible, but it may not be sufficient where performance remains possible while the economic and operational circumstances have materially changed.
This highlights the need for more flexible contractual drafting, which does not merely define rights and obligations and exit rights, but also incorporates mechanisms for adapting to changing circumstances.
A well-drafted clause may require the parties, upon the occurrence of an exceptional event, to follow an organised process that includes:
First,
Identifying the affected obligation and establishing the causal link between the exceptional event and its impact on performance, in order to distinguish genuine inability to perform from a deterioration in commercial performance.
Second,
Where performance remains possible, considering reasonable alternatives before termination, such as adjusting delivery schedules, identifying alternative suppliers, partial performance, rescheduling, or modifying project phases.
Returning to the conference example, alternatives may include postponing the event, reducing the number of rooms, or modifying service arrangements in a manner that allows the commercial relationship to be preserved.
Third,
Determining how additional costs are to be allocated, including the possibility of sharing procurement costs or adjusting prices based on objective and verifiable increases.
Drafting force majeure or exceptional events clauses in this manner provides greater clarity in dealing with a crisis before it occurs, rather than attempting to address it in the middle of a commercial dispute.
For companies operating in the UAE, their increasing reliance on international suppliers, customers, financiers and service providers makes them directly or indirectly exposed to the effects of international transportation, financial markets and geopolitical developments.
Contractual flexibility should therefore be regarded as part of business resilience and continuity. When negotiating a long-term contract, the question should not only be what will happen if matters proceed according to plan, but also what will happen when the assumptions on which that plan was based change.
This means that, where appropriate, the contract should contain clear provisions addressing force majeure and contractual hardship, mechanisms for renegotiation and temporary amendment, rescheduling arrangements, procedures for assessing the impact of disruption, practical alternatives to immediate termination, and a fair framework for allocating exceptional costs.
A legitimate question may arise: how can contracting parties anticipate the next geopolitical crisis?
The answer is that contracting parties are not required to predict the crisis itself, but rather to determine how it will be addressed when it occurs. This may be one of the most important measures of the quality and resilience of a contract.
If you have any questions or need further advice on related matters, please feel free to contact Hussam Alghofari: hussam.alghofari@sat-law.com
Written by Hussam Alghofari
September 16th, 2026
