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October 27, 2020
As governments around the world push out guidelines to help prevent the spread of coronavirus in uncommon ways. In a chain response of unforeseen occasions, breach of a contract in a pandemic circumstance effectively turns into a typical event with parties endeavouring to abide by government conventions or regulations to maintain health and security during the global pandemic.
While the world, on one hand, is trying their level best to stay safe during the pandemic and wait until the vaccine is issued, on the other hand, is trying to mitigate the losses or damages incurred during a breach of contractual obligations due to pandemic. Corporate Lawyers of Dubai agrees to the fact that there are various categories of damages available for the parties in the event of a breach of contract, which critically depends on the type of breach and under what circumstance. Through this article, we will elaborate on the different types of damages and the issues concerning the entitlements of such damage.
While examining potential damages, liabilities, and entitlements, different concerns must be attended. What is the pertinent legally binding commitment, and has it been fulfilled? What harm has been endured? Is there a causal connection between the breach of obligation and the damages suffered by the party? These models must be fulfilled so as to recuperate damages.
Primarily, we shall consider whether performing the special obligations outlined in the contract is an obligation of the relevant party, if yes, what shall be the consequences of any failure to perform such obligations. To demonstrate this fact, it is pertinent to elaborate on Article 386 of the UAE Civil Code, which gives that:
In the event that it is incomprehensible for an obligor to give specifically perform the obligations referred under the contract, except if it is demonstrated that the difficulty of execution emerged out of an external reason wherein (the obligor) had no influence, whatsoever.
So in case of a breach of an agreement, the obligor is unable to fix the situation or the damages suffered by the other party, the contract will oblige the obligor to compensate for the damages caused, except if the difficulty of execution is inferable from an 'external reason'. Nevertheless, what is an 'external reason'? It can incorporate nearly anything where the respondent had no impact in causing the misfortune of the agreement. Simply put, such external reasons may include acts committed by any third party, the claimant himself or any act of God, or force majeure events. In these conditions, no damages are payable. However, every event causing the failure of one party to fulfill his contractual obligation differs from the other due to different circumstances. Yet, Corporate Lawyers of Dubai desires to outline the impact of COVID-19 on contracts signed within the country and the liability of party's to pay damages for the failure of performance.
Article 249 of the UAE Civil Code offers courts or other authorities to adapt with any exceptional circumstances and amend the duties to be performed by either party in the contract. The said provision does not directly relieve the obligor from his contractual obligations, however, it issues the courts any authority to review the exceptional circumstances and reduce the contractual obligations of the respondent or obligor to a reasonable extent so as to preserve the interest of both parties. It is apparent the foregoing provision does not clearly allow one party to set aside his responsibility under the contract due to the presence of an exceptional event, therefore, it is pertinent to seek the advice of Civil Lawyers of Dubai to always be one step ahead of the other contractual party.