What is the current impact of the COVID-19 pandemic on commercial and consumer contracts?

business

|

August 11, 2021

|

805 views


| Your comment matters, please click here to rate article!



The Covid-19 pandemic is still interfering heavily with international trade creating disruptions and delays on an unprecedented scale. The world has completed more than one year since the Covid-19 outbreak. However, its far-reaching effects are still far from over. Pandemic outbreaks have occurred before on numerous occasions, and they have had a crippling effect on the world economy. However, never before the world has collectively experienced such bottleneck effect on international trade and shipping. The underlying causes are numerous and include factory closures, supply shortage, transit and payment delays, to name a few. Many businesses have been pushed to the brink of bankruptcy in increasing numbers worldwide.

In this article, we would identify several common legal and commercial issues. We would like to illustrate the legal measures applicable in the UAE in case of non -performance of commercial and consumer contracts on account of the pandemic.

One of the most common after-effects of the pandemic has been the 'contractual non -performance' on account of conditions that are beyond the control of the contractual parties or, in other words "Force majeure conditions". The word Force majeure is a French term that literally means "greater force", and in legal terms, it refers to 'unforeseeable circumstances that prevent someone from fulfilling a contract'.

The Federal law no. 5 of 1985 and its amendments on the Civil Transactions (UAE Civil code) states ‘force majeure' as follows:

Article 273

  1. In bilateral contracts, if a force majeure arises that makes the performance of the obligation impossible, the corresponding obligation shall be extinguished and the contract ipso facto rescinded.
  2. If the impossibility is partial, the consideration for the impossible part shall be extinguished. This shall also apply to the provisional impossibility in continuous contracts. In both instances, the creditor may rescind the contract provided the debtor has knowledge thereof.

Further, articles 274- 275 states the legal position if a force majeure condition is established as per article 273.

Article 274

When a contract is or shall be rescinded, the two contracting parties shall be reinstated to their former position prior to contracting, and in case this is impossible, the Court may award damages.

Article 275

If the contract is dissolved on the grounds of nullity, rescission or for any other reason, and both contracting parties have to return what they have taken possession of, each one of them may retain what he has received, as long as the other party did not restitute what he has received from him, or did not submit a guarantee for its restitution.

Despite the recognition of force majeure conditions under the UAE law, the parties to a contract should not be too quick to rely on the said general principle and should try to resolve the issues on mutual terms. As pursuant to Article 267 of the Civil code, "If a contract is valid and binding, none of the contracting parties may revoke, modify or rescind it except by mutual consent, order of the court or a law provision". UAE courts generally interpret force majeure conditions restrictively for each case as per its unique facts and circumstances. In addition, the UAE law imposes each party to confer with the good faith principle and to fulfil their contractual obligations.

Related Links


Copyright © of this article is retained by the author and/or other copyright owners. We explicitly grant you permission to download a copy, without any alteration, of this article for personal non-commercial research or study, without prior permission or any charge. This article can be utilized on your website or for marketing, however, we grant you permission to host this article on your website and no other rights. This content should not be altered in any way or sold commercially in any format without prior permission of the copyright holder. During reference of this article, full biographic details entailing the name of the author, his designation, the institute and the publishing date of the article shall be provided.


Client Testimonials

I owe the success of my case to Dr. Hassan's diligent approach. He remained focused, put me at ease and always went the extra mile. Dr. Hassan tirelessly put my case in the best possible light and I cannot thank him enough. I would highly recommend Dr. Hassan - I am grateful to him from the bottom of my heart.

Raphael Lauria
Manager, FME General Trading

Dr. Hassan Elhais is among the best legal consultants I have ever worked with. He has an amazing ability to reduce complex issues into a simple concept that non-legal people can understand. He consistently develops innovative litigation strategies that help us to achieve our ultimate legal goals.

Zhuo Liu
Client

...the extraordinary effort that has been exerted by the staff, and we specially thank Dr. Hassan Mohsen Alhais. Wishing your continues success & excellence...

H.H. Sheikh Saeed Bin
Mohammed Hashir Al Maktoum

I believe everyone should recognize what a difference Dr. Hassan Elhais work has made to people's lives; and especially to our family's life, because we will remain forever grateful to each and every one of his team.

Luis Pozueco
Client

Dr. Hassan Elhais never fears cases that involve exposure and he always gives me his honest assessment of our chances of success, which is invaluable to me.

Bassam Yamout
Director, JM Metal Trading LCC

He aided us not only in providing legal advice but also in all legal issues that required a long term strategic approach to achieve most favorable and optimum outcomes he provided us with high level of professional service.

Philippe Delbecq
Client

Dr. Hassan Elhais is a responsible, reputable counsel who operates to high levels of service.

British Client

Dr Hassan Elhais is responsive, thorough and creative with his advice, and is a valued advisor and legal consultant.

Asma Mattar
Manager, Italian Style

Regardless of the complexity of the matter I know Dr. Hassan Elhais will consider not only legal strategy but also business practicalities in providing advice and litigation options.

Dr. Massimo Hakim
Chairman, Italian Style

I recommend Dr. Hassan Elhais to anyone who says 'I'm in legal trouble'. I was extremely satisfied with the high standard of his work. He has always been there when I have needed him and I refer all my clients, family and friends to him/his firm.

Manish Gupta
Marketing Manager, Express Digital System

Dr. Hassan Elhais was very professional and he listened to my needs. He was very prompt, efficient and always kept me informed. Dr. Hassan Elhais's service was excellent and I would definitely recommend him to friends and colleagues.

James Horsley
British Client

Comments

No comments found.

Leave a Comment

Your email address will not be published. Required fields are marked *

Want to know more?
Then talk to us.


Select your Language:

        

Main Menu