Insight
Is Your Contract Portfolio Protecting You — Or Exposing You?
For most businesses, the honest answer to the question above is: they don’t know. And not knowing, right now, is expensive.
· 3 min read
Problem With Contracts Written for Normal Times
Commercial agreements are typically drafted when conditions are stable, and counterparties are motivated to perform. They set out timelines, payment obligations, penalties, and exclusivities — and they assume a world that functions more or less as expected. When that assumption breaks down, the contract does not disappear. It stays in force, and someone is left holding the risk. The question a contract audit answers is: in your portfolio, who is that someone? Under the UAE Civil Code(Federal Law No.5 of 1985), Article 249 gives courts the power to reduce a party’ s obligations to a“ reasonable level” where exceptional public circumstances make performance excessively burdensome— even if full impossibility cannot be proven.Article 273 goes further, extinguishing the obligation entirely where an external event renders performance impossible.These protections are real, but they are not automatic.They require the affected party to have documented their position, acted reasonably, and followed any procedural requirements set out in the contract.
Businesses that cannot demonstrate those things are unlikely to benefit from them.
Force Majeure: Strong on Paper, Weak in Practice
Most commercial contracts include a force majeure clause. In practice, many of those clauses are poorly drafted, operationally ignored, or procedurally defective the moment they are invoked. The most common failure is notice.UAE contracts routinely require prompt written notification of a force majeure event, followed by ongoing updates and evidence of mitigation.Missing those steps— even when the disruption itself is genuine and well documented— can defeat the claim before it reaches a court or arbitral panel.
For businesses operating in or through DIFC or ADGM, the bar is higher still. Under DIFC Law No. 6 of 2004 and the ADGM Contract Regulations, English common law principles apply: force majeure must render performance legally or physically impossible, not merely commercially inconvenient or more costly. A clause that would succeed under the UAE Civil Code may fail entirely under DIFC jurisdiction if the drafting is not precise. Across the broader GCC, the landscape varies further. Saudi Arabia’s Civil Transactions Law (Royal Decree M/191, 2021) recognizes frustration of contract but places the burden of proof firmly on the party seeking relief. Kuwait’s Civil Code (Law No. 67 of 1980) and Qatar’s Civil Code (Law No. 22 of 2004) each recognise hardship doctrines with different thresholds and notice requirements. If your business holds agreements governed by more than one jurisdiction — as most regionally active companies do — you are operating under materially different legal standards simultaneously.
A contract audit maps those differences before they become disputes.
What a Contract Audit Actually Does
A structured contract audit is not a legal health check in the abstract. It is a systematic review of your active agreements against the specific conditions you are operating in, with three practical outputs.
First, it identifies which contracts carry enforceable protection and which do not. This means reviewing force majeure language, governing law clauses, dispute resolution mechanisms, and notice requirements across your portfolio — not just the headline agreements, but sub contracts, service agreements, and supplier terms where the liability chain is often longest. Second, it identifies where your obligations to third parties remain live even when your upstream suppliers have failed to perform. The fact that your logistics provider has successfully invoked force majeure does not release you from your obligations to your own customers. Many businesses discover this exposure only after a claim is filed. Third, it produces a priority action list: which contracts need protective variation now, which counterparties should be engaged proactively, and where formal notice of disruption should be issued without delay.
The Cost of Waiting
Legal disputes arising from performance failures are slow, expensive, and reputationally damaging. An arbitration proceeding under the DIAC or ADGM courts can run for months or years. The cost of a well-documented contract audit — conducted before a dispute arises — is a fraction of the cost of defending or pursuing one. The businesses that emerge from periods of disruption in the strongest position are those that treat legal risk as operational risk: visible, measurable, and managed. A contract audit is how that process starts.
LexDesk360 is a UAE based alternative legal services provider offering senior counsel at accessible pricing. Our LexFend Contract Audit reviews your active agreements, maps your force majeure exposure across jurisdictions, and delivers a clear action plan. Contact us to arrange an initial assessment.
This article is general information about the law at the date of publication. It is not legal advice and should not be relied on as such. For advice on your circumstances, talk to counsel.
