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Force Majeure is a legal term defined as “unforeseeable circumstances that prevent someone from fulfilling a contract”. Although a specific definition of this legal jargon does not occur in the UAE Civil Code, albeit its implementation is regulated through clauses of several articles which allude towards the functioning of Force Majeure in contractual obligations.
The UAE Civil Law Code is based on the French Civil Law that explains the contractual obligations under the concept of ‘rebus sic stantibus’, which recalls somehow the doctrine of Stare Decisis in English Common Law as well.
The Law of Frustration explained in English common law and Scott’s Law certainly gives credence to the application of the principle; however, the legal doctrine often drags simple matters to the jurisdiction of the courts.
The roots of this regulation lay in the UAE Civil Code (Federal Law Number 5 of 1985, which) sets the principal framework of a Force Majeure Event, the legal repercussions to be deduced from it.
Under the Rudimentary structure of the UAE Civil code, Article 273 stipulates that for an event to be qualified as a force majeure it should be: (a) affirmed in a bilateral agreement; and (b) makes the performance of the obligation impossible. Articles 249, 273, 287 and article 893 of the UAE Civil Code explain the enactments which may apply a force majeure to a contract, based upon circumstantial.
IMPACT ON THE REAL ESTATE
The case of Real Estate is far more significantly different than any other walk of life in the UAE. Hitherto, due to the overwhelming challenges, this sector has already gone through for the past decade and above, significantly qualifies real estate to be unique. Another legal clause helps motivate litigators on Real Estate Issues, unanimously known as the “Act of God” clause, remain as a precedent due to the continued spread of COVID-19 (Coronavirus) on all Real Estate Matters, as all realty contracts possess this clause in them.
Article 249 of the Civil Code stipulates that if exceptional circumstances of a public nature were unprecedented or unforeseen occur, i.e. a force majeure, as a result of which the application of a contract becomes no-conducive for compliance, but not necessarily impossible, the Judge can use his prerogative to authorise to lessen the obligation to a considerable degree.
The relationship regulating the contractual obligations of tenants and landlords is enacted through Dubai by Law No. 33 of 2008 in the Emirate of Dubai. The arising rental disputes referred to Rental Disputes Settlement Centre (“RDSC”) came into inception through the promulgation of the historic Decree No. 26 of 2013 enabling reconciliation between the tenant and the landlord through an amicable settlement further seeking an equivocal judgment issued followed by promulgation by the RDSC. According to expert analysis, Article 249 is the basis of complaints lodged at the RDSC under the purview of RERA. Hence, if due to the implementation of Ministerial Resolution 279 of 2020, a person’s income has been reduced and the landlord does impertinent to the cause, the tenant can approach Rera. Article 273 also helps in this regard, because it stipulates the conditions alluding to a force majeure. 273(1) specifies that a force majeure event makes a contract impossible, all contractual obligations will stop, and the agreement will be automatically terminated. Furthermore, Article 273 (2) corresponds regarding cases where the force majeure event takes only a segment of the obligations impossible to perform, and then only that section of the contract will be cancelled. The subsequent remainder holds effect. When a contract is terminated under Article 273 (1) or 273 (2), the landlord and the tenant have to revert to the date on the tenancy contract; if not possible, damages may be awarded to the party who suffered a loss as a result of the inability to terminate the contract amicably. The tenant secures more weightage in this regard and should be desired for clemency. RDSC will evaluate the circumstances and award the case accordingly. Generally, the arbitration takes place through a reconciliation agreement, which shall be practised by the claimant and respondent, when an amicable settlement is achieved. The application can only be filed if the rent claim is above AED 100,000.
In hindsight, if a tenant’s income dropped to a level that circumvents him from paying the rent, the tenant may terminate the contract without any liability towards paying the penalty on giving notice to the landlord. Thus the security deposit has to be refunded by the landlord, and the rent will be concluded or furthered based upon a pro-rata calculation. As a consequence, if the landlord disagrees, then he may submit the matter to the Court, who in turn will decide whether the tenant’s circumstances should be decreed under a force majeure? Nonetheless, if the landlord fails to follow any of the above procedures, then he/she relinquishes his/her right to demand an eviction or termination of the contract, as the contract will remain intact and shall be awarded a full consent by the law. It is imperative to note that the current climate is not the most conducive in terms of resolving disputes. If a dispute arises our advice to all residents of the UAE, including landlords and tenants, please try to resolve it internally through your attorney’s advice.
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