How UAE hardship law changes have been brought into contracting modern era

The UAE Civil Transactions Law, which dated back to 1985, was repealed and replaced at the beginning of June by updated legislation as part of the new UAE Civil Code

Among the notable provisions carried forward - yet refined - is the doctrine of “exceptional circumstances”, or hardship, which is now reflected in article 224 of the New UAE Civil Code.

Both the original article and the new version preserve core elements of the hardship doctrine, including:

• the requirement of exceptional, general, and unforeseeable circumstances;
• a situation where performance is not impossible, but has become excessively onerous for the debtor;
• a threshold of threatening substantial loss; and
• the court’s role in rebalancing contractual obligations, taking into account the interests of both parties.

The reasoning behind these similarities is to confirm that the law maintains the established principle of judicial intervention to restore contractual equilibrium in cases of hardship.

What has changed

While core elements have been retained, article 224 of the New UAE Civil Code introduces two important developments to the way in which the legislation deals with hardship.

Firstly, it creates a new provision of temporal clarification, which reinforces a requirement that the arising exceptional public circumstances were not foreseeable when the agreement was concluded.

Secondly, it introduces expanded judicial powers around the issue, most notably by broadening the court’s remedial authority. While the previous rules limited courts to reducing the onerous obligation to reasonable limits, article 224 now expressly allows courts to reduce the obligation, or order termination of the contract, where appropriate.

This flexibility aligns the UAE regime more closely with modern comparative approaches to hardship.

Expected application

In practice, UAE courts - and arbitral tribunals applying UAE law - are likely to continue applying this doctrine cautiously, given its exceptional nature. However, the express authority to order contract termination may encourage a more robust use of the provision in severe cases where rebalancing alone is insufficient.

At the same time, courts will likely continue to maintain a high threshold for establishing “exceptional circumstances”, ensuring that the principle is not used to undermine contractual certainty.

The emphasis will remain on balancing fairness with the principal that agreements must be kept, - or ‘pacta sunt servanda’ - with intervention reserved for genuinely disruptive and unforeseeable events.

Overall, article 224 signals an evolution rather than a departure, retaining the essence of the previous laws while equipping courts with a broader toolkit to achieve equitable outcomes.