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September 30, 2020
Our economy constantly bled for several months due to severe impact of coronavirus and world is trying its best to recover from the damage sustained. In this crucial times, many corporate entities or individuals may benefit the situation if they are under a corporate obligation.
The impact of coronavirus has the resulted in many exceptional ways of breaching the provisions of contracts or terminating them. Commercial lawyers of Dubai in the said article will discuss the legal consequences of breaching a contract during COVID-19 in UAE.
The Commercial transactions and Civil Procedure Law of UAE allows parties to define the terms of their contract and work according to such terms unless those terms oppose to the public policy of the country. In general the basic principle of contract is the consent which shall be duly received at the time of signing the contract in accordance with Article 257 of the UAE Civil Code.
It further obliges the party to clearly define their intentions under the contract and shall develop their contractual relationship explicitly. Having said that, it shall also define the circumstances under which the contract can be terminated or the consequences for breaching the provisions of the agreement.
Similarly, any discussion pursuant to the impact of coronavirus on any party to the contract shall be in relation to the provisions of the contract. Generally speaking the impact of coronavirus on an individual is as such that the party is unable to perform its obligations mentioned in the contract.
Having said that, there are various circumstances a contract can be breached or terminated by the either party which accordingly gives the right to the other party to file a claim for seeking consequential damages for the same. In the present circumstances, it is more likely that the contracts can be subject to a breach in event the other party fails to perform its contractual obligations which on the other hand can be defended that failure to perform such obligations was an outcome of coronavirus.
In line with the foregoing, the basic remedy available to any party suffering in the contract is to claim consequential damages from the other party which were incurred due to failure of other party to perform its obligations.
Nevertheless, the present circumstances are most likely to be considered as a force majeure event which defined as an event depriving the parties to adhere with their contractual obligations. The impact of coronavirus was as such that we were and are mostly forced to temporarily shut our businesses (as per the regulations of the government). In further Article 273 and 287 of the Civil Code allows partial or complete termination of contracts if the parties are incapable of performing their duties due to such force majeure event.
In light of the afore-mentioned, it is all unprecedented that the suffering parties will be able to claim damages for the loss suffered due to failure of other parties if the other parties challenges the claim on grounds of force majeure. It is high time to seek professional advice from Commercial Lawyers of Dubai to ascertain your position under the commercial contract.