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Coronavirus and its impact on the performance of commercial contracts from a UAE legal perspective
2. Implementation of Force Majeure Clause with respect to the Coronavirus outbreak:
Although the Court may consider the current circumstances and its impact on a contractual relationship, the contracting party that claims the applicability of the Force Majeure clause must provide a detailed description of the merits and analysis of the events. The party must also demonstrate its effect on the contract in order to establish the credibility of the case. The party claiming Force Majeure would be required to prove that the inability to perform was due to an incident beyond its control and has rendered the contractual obligations impossible or significantly impractical to perform.
For example, the UAE government has recently issued a decree that declares all UAE residents who are currently abroad can no longer enter the UAE until Further notice. However, the decree does not apply to the participants of the Dubai EXPO. Therefore, it is clear that the participants of the EXPO can not argue they could not perform their duties due to the travel restrictions in the UAE. However, it may be accepted that they could not perform their contractual duties if they can prove that they were not able to travel from their own country due to government-issued travel restrictions.
On the other hand, in the event that the EXPO participant was obligated under the contract to supply workers to the EXPO, it can not be argued that it's impossible to supply the workers based on the abovementioned decree, as the said decree is only limited to those who are existing UAE residents.
However, if the government of the UAE issued a second decision that orders to close its borders against some nationals, and the contract does not specify the workers to be supplied, the participant must act in good faith in order to execute his obligations. For example, the party can supply workers from other nationalities who are not listed within the ban in order to establish good faith. unless the government decision is considering the closure of borders against the entire world.
3. Conclusion:
The court of the UAE has the full discretion to interpret the contractual terms and determine that in the instance a party has failed to perform his contractual duties, such party shall be liable to compensate the other party unless that liable party proved that the failure to perform was directly caused due to the Force Majeure event. Bearing in mind that to determine whether the a spesfic event should be considered as a Force Majeure or not is subject to court discretion . Written By: Taha Sharaf – Executive Associate