The legal effect of Covid-19 (Coronavirus Pandemic) on Construction Contracts under UAE Law

During the Covid-19 Pandemic, some construction projects experienced interruptions or slowing in the pace of progress. Others were suspended or terminated. Naturally, the question here becomes about the legal consequences. 

Under UAE Civil Law, there are some articles that are helpful. I am quoting them below. Covid-19 may be classified as a force majeure case. It was not foreseeable at the time of making the contract and it affects all our life aspects. If, as a result, all or part of a project is terminated, articles 273 & 893 will apply. The contract will be set aside and the contractor will be entitled to the value of the work which he has completed and the expenses he has incurred in the performance thereof up to the amount of the benefit the employer has derived therefrom.

Obviously, the contractor will be entitled to be only paid up to the value of the benefit conferred on the employer. The contractor will not be able to claim compensation for its losses as there is no breach from the employer's side.

If, however, the pace of progress is slowed by Covid-19 or temporarily put on hold, the contractor will be entitled to extension of time, under Article 249. No liability will be imposed on either party as there is no breach by either of them. 

§  Article 249 of the UAE Civil Code
“If exceptional circumstances of a public nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge, in accordance with the circumstances and after weighing up the interests of each party, to reduce the oppressive obligation to a reasonable level if justice so requires, and any agreement to the contrary shall be void.”

§  Article 273  of the UAE Civil Code
(1) In contracts binding on both parties, if force majeure supervenes which makes the performance of the contract impossible, the corresponding obligation shall cease, and the contract shall be automatically canceled.
(2) In the case of partial impossibility, that part of the contract which is impossible shall be extinguished, and the same shall apply to temporary impossibility in continuing contracts, and in those two cases it shall be permissible for the obligor to cancel the contract provided that the obligee is so aware.

§  Article 894  of the UAE Civil Code
If the contractor commences to perform the work and then becomes incapable of completing it for a cause in which he played no part, he shall be entitled to the value of the work which he has completed and the expenses he has incurred in the performance thereof up to the amount of the benefit the employer has derived therefrom.


Professor Aymen Masadeh
Listed Arbitrator at DIAC & LCIA
Board Menber of the ICLA

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