A familiar problem regularly arises in the UAE’s fast‑moving real estate market. A buyer facing serious cash‑flow pressure, or a developer struggling with supply‑chain disruption, tries to walk away from an ongoing Sales and Purchase Agreement (SPA) by declaring force majeure.
The answer from the UAE courts is consistent and unforgiving: force majeure cannot be used to escape a property transaction simply because performance has become difficult, expensive, or commercially inconvenient.
Yet a widespread misconception persists. Many market participants assume that force majeure operates as a commercial safety valve, something that can be invoked when a deal no longer makes economic sense. That belief is wrong and this article explains why.
By way of practical illustration, force majeure is usually not applicable in secondary‑market transactions (Contract “F” scenarios). An external event is generally not capable of rendering payment or completion objectively impossible. A purchaser who attempts to cancel a secondary‑market sale by invoking force majeure, whether due to financing difficulties, regional conflict, market downturns, or currency constraints, will usually fail. UAE courts treat the obligation to pay the agreed price as a generic monetary obligation, which rarely meets the legal threshold of impossibility.
The same principle applies in off‑plan transactions from the purchaser’s perspective. A buyer under an off‑plan SPA cannot suspend instalment payments or terminate the agreement by invoking force majeure merely because of job loss, liquidity stress, or broader market conditions. These factors may render performance painful or financially oppressive, but they do not render payment objectively impossible.
What Force Majeure Actually Means Under UAE Law
To comprehend the UAE courts’ posture towards force majeure claims, one must examine the jurisprudential foundations of the UAE civil law system. The framework places paramount importance on the principle of pacta sunt servanda, the doctrine that agreements must be kept. This same principle underpins how UAE courts treat other payment obligations, including bounced cheque recovery through execution courts. A force majeure defence is not merely a negotiated contractual mechanism; it is codified as a mandatory statutory doctrine governing the extinction of contractual obligations.
Under Federal Law No. 5 of 1985 (the “1985 Civil Code“), the doctrine is anchored in Article 273. This provision stipulates that if an event supervenes that renders the performance of the contractual obligation strictly impossible, the corresponding obligation shall cease, and the contract is cancelled as a matter of law, subject to judicial confirmation. Depending on the contract’s dispute resolution clause, such proceedings may be heard in the DIFC Courts or UAE local courts. Looking ahead, proposed reforms to the 1985 Civil Code via Federal Decree-Law No. 25 of 2025 (“2025 Civil Code”) are expected to transition this doctrine to Article 236, maintaining the bedrock requirement of absolute impossibility while providing clearer parameters for judicial intervention.
To successfully trigger force majeure, the affected party must establish all three of the following:
- The event must have been unforeseeable at the time the contract was executed.
- The party must prove that no reasonable mitigation measures could have circumvented the impediment.
- Performance must be rendered objectively impossible, not merely difficult, expensive, or highly inconvenient.
Why It Almost Never Applies to a Property SPA in Progress
Translating these rigid statutory standards to the UAE property market reveals precisely why invoking a force majeure defence is an ineffective tool for parties seeking an opportunistic exit.
The Objective Test and COVID-19 Precedents
The UAE judiciary adopts a highly restrictive approach. The barrier to performance cannot be overcome by logistical or financial means. A property dispute COVID force majeure claim provides the clearest precedent. During the pandemic, developers and buyers frequently attempted to utilise lockdowns as blanket declarations to terminate agreements. However, UAE courts consistently ruled that the pandemic did not automatically constitute force majeure across all commercial contracts. If a contractor was demonstrably capable of partial performance, such as continuing limited site works, the external event clearly did not render the obligation absolutely impossible, resulting in the rejection of the defence. For real-world examples of how UAE courts handle complex disputes, see our case studies.
The Developer vs. Buyer Asymmetry
By contrast, developers may in certain cases rely on force majeure, but only within the narrow confines expressly permitted by the SPA and applicable RERA regulations. Even where a force majeure event is contractually recognised, its legal effect is typically limited to an extension of construction timelines or relief from delay penalties. It does not entitle the developer to unilaterally cancel the project or extinguish purchaser rights.
In practice, RERA‑approved SPAs commonly permit developers to rely on force majeure to justify delays in completion or handover, subject to notification and substantiation requirements. Tenants and landlords facing related disputes should also understand their rights under the Dubai tenancy law. However, force majeure does not operate as a cancellation mechanism in favour of developers. Termination of an off‑plan project is governed by the statutory framework administered by RERA (discussed below), not by contractual invocations of force majeure.
When an off-plan development falls behind schedule, developers often attempt to issue blanket notices to buyers to excuse their failure to meet handover deadlines. However, standard construction delays, even those exacerbated by regional conflicts or supply chain disruptions, typically only render the procurement of materials more expensive, not impossible.
Conversely, for an off-plan cancellation force majeure attempt by a buyer facing a market crash or personal financial ruin, the legal reality is equally uncompromising. Economic downturns are never considered force majeure. The UAE legal system holds that the obligation to pay money is a generic obligation that is never objectively impossible to perform. The impossibility must be absolute across the entire market, not subjective to an individual investor’s bespoke financial health.
The Narrow Exceptions: Where Force Majeure Actually Applies
While the courts fiercely protect active transactions, there are narrow, highly specific circumstances where absolute impossibility may be established, allowing a party to legitimately exit a real estate transaction.
- Physical Destruction of the Property: If an unprecedented, unavoidable natural disaster completely destroys the specific property or the underlying land prior to handover, the delivery obligation is rendered physically impossible, triggering rescission as a matter of law, subject to the applicable RERA cancellation and refund procedures.
- Government Expropriation or Seizure: If the sovereign authority expropriates the land for public utility or halts a master development indefinitely by binding decree, the developer is legally barred from performing, constituting a valid external impossibility.
- Legally-Imposed Impossibility (Sanctions/Embargoes): An outbreak of war or the sudden imposition of international sanctions that creates a strict legal barrier (e.g., freezing all transactions with a specific nationality) transforms the transfer of title into a legal impossibility, extinguishing the specific obligation without fault.
Project Cancellation and Purchaser Refunds
In the UAE, the cancellation of an off‑plan project is generally not governed by force majeure doctrine but by a distinct, mandatory statutory regime administered by the Dubai Land Department and RERA. Where a project is cancelled, whether due to impossibility, regulatory intervention, or developer default, purchaser rights are determined by Law No. 13 of 2008 Regulating the Interim Property Register and Executive Council Resolution No. 6 of 2010 (the “Resolution”).
Under the Resolution, RERA may cancel a development project in defined circumstances, including where the developer fails to commence or continue construction, lacks intention to implement the project, or is declared bankrupt. Disputes between landlords and tenants or developers and investors are resolved through dedicated rental dispute forums in Dubai and Sharjah. Upon cancellation, the Resolution obliges RERA to appoint a certified auditor to assess the project’s escrow account and to supervise the refund process.
Crucially, where a project is cancelled, purchasers are entitled to refunds of amounts paid, sourced first from the project escrow account in accordance with Law No. 8 of 2007 Concerning Escrow Accounts for Real Estate Development. If the escrow account is insufficient, the Resolution obliges the developer to refund the outstanding amounts directly within sixty (60) days, subject to any extension granted by RERA for valid reasons.
What Buyers and Sellers Should Do Instead
Because the “absolute impossibility” threshold is rarely met, stakeholders engaged in a troubled property transaction must definitively pivot away from relying on statutory force majeure as a post-facto safety net and utilise alternative legal mechanisms.
The Hardship Doctrine (Exceptional Circumstances)
The statutory antidote to the rigidity of force majeure is the doctrine of exceptional circumstances (hardship), codified in Article 249 of the 1985 Civil Code (and Article 224 of the 2025 Civil Code). This unforeseen circumstances property contract provision is activated when an exceptional event of a public nature renders performance excessively oppressive, threatening grave financial loss. Critically, it does not grant the right to terminate; instead, it empowers the judiciary to intervene and recalibrate the contract to a reasonable level.
Material Breach and Mutual Termination
Rather than claiming force majeure, aggrieved buyers facing heavily delayed projects should rely on claims of material breach. If a developer unjustifiably relies on an invalid force majeure claim and fails to deliver within the contractually permitted grace period (commonly up to 12 months), the buyer is legally entitled to seek the remedies available under the contract or seek termination of the SPA and/or damages under UAE law in Dubai Courts. Buyers may also consider precautionary orders and execution of judgments to safeguard their interests during ongoing litigation. Alternatively, parties can proactively negotiate a mutual termination or draft bespoke exit mechanisms tailored to commercial realities. SK Legal’s commercial advisory services support clients in structuring these mechanisms before disputes escalate.
Conclusion
In UAE real‑estate law, force majeure is not a commercial escape hatch. It is a narrow statutory doctrine designed for genuine impossibility, not economic distress. Parties who mistake hardship for impossibility almost invariably fail.
Durable outcomes are achieved not through opportunistic invocation of force majeure, but through disciplined drafting, regulatory awareness, and the judicious use of hardship and breach‑based remedies. If you are navigating a complex property transaction, our real estate legal services can help protect your position from the outset.
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