A fixed price clause no longer closes the question when costs move against one party. This article explains the hardship power in Article 224 of the new Civil Code, why no contract can exclude it, and how it differs from the weaker provision covering lump-sum construction contracts.
Can a UAE court change the price of a contract that has become unaffordable?
–Yes, under Article 224, and no clause in the contract can prevent it
Where exceptional general circumstances arise that could not have been foreseen at the time of contracting, the court may intervene. The condition is that performance has become onerous for one party to the point of threatening serious loss. It can reduce the onerous obligation to a reasonable level, and under the new Civil Code it can also rescind the contract altogether. The provision is mandatory. Any agreement that attempts to exclude or limit it is void, which means the no-adjustment clause negotiated into a long-term supply or project agreement does not do what the parties intended.
- The power is in Article 224. Federal Decree-Law No. 25 of 2025 took effect on 1 June 2026 and replaced the 1985 Civil Code in full, with 1,422 articles in place of 1,528.
- Rescission is new. The old provision allowed a court only to reduce the obligation. Article 224 adds the power to rescind the contract after weighing the interests of both parties.
- It cannot be contracted out of. Any agreement purporting to exclude or limit the court's power under Article 224 is null and void.
- The construction provision is weaker. Article 829(3) gives a similar power for lump-sum contracts, but it is not mandatory, so parties can exclude it.
- The old article number is now wrong. Hardship was Article 249 under the 1985 code. In the new code, Article 249 covers something else entirely.
Who this applies to
This article is for anyone holding a long-term contract with price or cost exposure. That includes suppliers and buyers under framework agreements, contractors and employers on fixed-price projects, and distributors and facilities managers. It also covers charterers and shippers under rate agreements, and parties to long leases.
It applies across construction, energy and maritime and logistics, and to any commercial agreement where one side carries the cost risk. Our commercial lawyers in Dubai advise on hardship claims, on resisting them, and on drafting for the regime that now applies.
The remedies available for an ordinary breach, as opposed to a change in circumstances, are covered in our article on recovering losses from a breached UAE commercial contract.
The legal framework
Hardship is a civil law doctrine, and the governing provisions are in the Civil Code rather than in the commercial legislation.
- Federal Decree-Law No. 25 of 2025 on Civil Transactions, issued on 1 October 2025 and in force since 1 June 2026, which repealed Federal Law No. 5 of 1985 in its entirety
- Article 224, the general hardship provision, expressed in mandatory terms
- Article 829(3), which applies the same idea to lump-sum muqawala contracts and is not expressed as mandatory
- Article 340, which governs agreed compensation and allows a court to adjust a liquidated figure, and which is also beyond the parties' control
- Federal Decree-Law No. 50 of 2022 on Commercial Transactions, which governs commercial dealings and leaves the Civil Code to fill the gaps
Where a claim is brought:
- The onshore courts, applying the Civil Code directly under Federal Decree-Law No. 42 of 2022
- An arbitral tribunal seated onshore, where the governing law is UAE law
- The DIFC and ADGM courts, which apply their own contract frameworks and are outside the Civil Code entirely
What Article 224 requires
Exceptional and general circumstances
The circumstances must be exceptional and general rather than particular to one party. A collapse in a single supplier's finances does not qualify. A region-wide disruption to shipping routes, a sudden regulatory change, or a sustained commodity price movement affecting a whole market can.
The wording in the new code shifted from exceptional events to exceptional general circumstances, which points the inquiry at the market condition rather than at a single incident.
Unforeseeable at the time of contracting
Foreseeability is tested at the date the contract was made. A risk the parties discussed, priced, or allocated expressly is foreseeable and defeats the claim. This is the condition most hardship arguments fail on, because sophisticated parties generally contemplate price movement in some form.
Performance becomes onerous, threatening serious loss
Hardship does not require impossibility. It requires that performance has become oppressive to the point of threatening the debtor with serious loss. That is a lower threshold than force majeure and a high one in absolute terms, because mere reduced profitability is not enough.
The court balances both sides
Article 224 directs the court to act according to the circumstances and after weighing the interests of both parties. The remedy is restoration of balance rather than relief for the party in difficulty. A court can decline to intervene where the creditor would be left in a worse position than the debtor.
What the court can order
Under the 1985 code the court could reduce the onerous obligation to a reasonable extent, and nothing more. Article 224 keeps that power and adds the power to rescind the contract.
That addition changes the negotiating position materially. A supplier facing a hardship claim under the old law knew the worst outcome was a price adjustment. Under the new law, a counterparty that would rather exit than perform at a revised price has a route to do so, and the court decides which outcome restores the balance.
Why the construction provision is weaker than the general one
Article 829(3) gives a court power over lump-sum muqawala contracts where exceptional circumstances that could not reasonably have been anticipated arise and the financial basis of the agreement collapses. The court may extend the time for performance, adjust the price, or rescind the contract.
It reads like a construction-specific version of Article 224, and in substance it is. The difference is that Article 829(3) is not expressed in mandatory terms, so the parties may contract out of it.
That produces an unexpected result. An employer that excludes Article 829(3) in a lump-sum contract has not removed the contractor's hardship route, because Article 224 remains available and cannot be excluded. Drafting that targets only the construction provision leaves the general one untouched.
The consequence for project documents is covered in our article on contractor payment security in the UAE. The EPC risk allocation position is covered in our article on EPC contract disputes in UAE energy projects.
Hardship is not force majeure
The two doctrines answer different questions and produce different outcomes, and conflating them is the most common error in a claim.
Force majeure requires impossibility. Where an event makes performance genuinely impossible, the obligation ceases and the contract is cancelled. Increased cost, supply disruption and reduced profitability do not meet that threshold, as the Dubai courts have confirmed repeatedly.
Hardship requires only that performance has become oppressive. Performance remains possible, and the aim is to keep the contract alive on adjusted terms rather than to end it.
A force majeure clause does not displace Article 224. Where a contract made after 1 June 2026 contains a force majeure clause, a court will consider both that clause and the statutory hardship framework. The clause defines what the parties agreed about impossibility. It does not remove the statutory floor on hardship.
The drafting that works for force majeure specifically, including notice periods and mitigation obligations, is covered in our article on supply chain contract disputes in the UAE.
Which contracts are affected, and when
Contracts concluded before 1 June 2026 remain governed by the 1985 Civil Code. Contracts concluded on or after that date fall under the new law. That is the general rule, and it means two regimes now operate side by side across most contract portfolios.
Limitation periods are the exception. The new law applies to limitation periods not yet expired on 1 June 2026. Where the new period is shorter than the old one, time began from 1 June 2026, unless the remaining period under the old law would expire sooner.
Renewals and variations matter. A framework agreement signed in 2023 and renewed in July 2026 raises a real question about which code governs the renewed term. The answer depends on whether the renewal created a new contract or extended an existing one, and the documents rarely make that clear.
Common mistakes
Citing Article 249 for hardship. It was the right article until 1 June 2026. In the new code it covers something else, so a submission built on it points at the wrong provision. Any template, opinion or briefing written before that date needs checking.
Relying on a no-adjustment clause. A clause stating that the price is fixed regardless of circumstances does not exclude Article 224, and an attempt to exclude it is void.
Excluding Article 829(3) and stopping there. Removing the construction provision leaves the general one intact and mandatory.
Treating cost increases as hardship. The threshold is serious loss, not reduced margin. A claim brought on thin facts invites a finding that the risk was foreseeable and allocated.
Assuming the contract will survive. Rescission is now available, so a party that invokes hardship to force a price renegotiation may find the contract ended instead.
Forgetting the free zones. A contract governed by DIFC or ADGM law is outside the Civil Code, and Article 224 has no application to it.
What businesses should do next
- Date every contract in the portfolio. The dividing line is 1 June 2026, and the applicable code determines which article numbers and which remedies apply.
- Check price and escalation clauses against Article 224. Any wording that purports to exclude judicial adjustment is void, and relying on it in a negotiation is a weak position.
- Price the risk rather than excluding it. An express escalation mechanism tied to a published index gives both sides certainty and reduces the scope for a hardship argument later.
- Record what was foreseeable at signature. Minutes, risk registers and pricing assumptions become the evidence that defeats or supports a later claim about foreseeability.
- Review templates for old article numbers. Contracts that cite Civil Code provisions by number will now point at the wrong text.
- Consider the seat and governing law on new agreements. A DIFC or ADGM governing law clause removes the statutory floor entirely, which may suit one side and not the other.
Where a contract contains an agreed compensation figure, the court's power to adjust it under Article 340 operates on the same mandatory basis. Our guide to liquidated damages in the UAE covers that position.
Can a UAE contract still allocate price risk with certainty?
Less completely than before. The parties remain free to agree the price, the mechanism and the allocation of ordinary commercial risk, and the courts respect that bargain. What they can no longer do is close the door on judicial intervention where exceptional general circumstances destroy the financial basis of the agreement. Article 224 puts a floor under every onshore contract, and the floor cannot be removed.
The thing that most often goes wrong is reliance on drafting that was adequate under the old code and is now partly ineffective. A no-adjustment clause reassures the party that insisted on it, and in a hardship claim it carries no weight at all. The time to discover that is while the contract is being negotiated rather than when the other side files.
The commercial consequence cuts both ways. A contractor or supplier carrying cost exposure has a route it may not realise exists, and a counterparty relying on fixed pricing has an exposure it may not have priced. On a multi-year agreement, the difference between those two positions is the whole of the margin.
For parties bringing or resisting a hardship claim, our corporate and commercial team advises on Article 224 claims, contract revision, and drafting that works under the law now in force.
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