<p><strong>Principle</strong><br /><br />When the performance of an obligation under a  binding contract becomes impossible, the contract will be terminated, thereby  extinguishing the subject obligation and returning the parties to their  pre-contractual positions,. This means that each party will be required to  return that which he had received under the contract. If that is not possible,  the court will award damages. An extraneous cause such as an unforeseen  occurrence, force majeure, fault of the aggrieved party or the act of a third  party may be pleaded as a defence to liability in both tort and in  contract.<br /><br /><strong>Claim</strong><br /><br />A commercial action was filed by  a company (&ldquo;the Claimant&rdquo;) against the first and second defendants, being the  Dubai International Airport and a Contractor (together &ldquo;the Defendants&rdquo;). In his  action The Claimant sought an order from the court:</p>
<p>-&nbsp;that the Defendants pay, jointly and severally, the amount AED  3,406,323.27; alternatively</p>
<p>-&nbsp;an order of specific performance, plus the payment of damages for the  period of non-performance<br /><br /><strong>Facts</strong><br /><br />The Claimant&rsquo;s  case was that it had concluded a contract with the Defendants to supply 35  airlock units and accessories for installation at the Dubai Flower Centre, which  was part of the Dubai International Airport Expansion Project. In compliance  with its obligations, the Claimant instructed its UK factory to purchase the raw  materials and engineering materials required to manufacture the airlock units.  The Claimant asserted that the Defendants had both refrained from performing  their obligations under the contract and then arbitrarily terminated it without  notice, thus causing loss and damage to the Claimant.&nbsp;<br /><br /><strong>The Court  of First Instance</strong></p>
<p>An expert was appointed by the Court of First Instance. Upon receipt and  review of the expert&rsquo;s report, the Court ordered as follows:</p>
<ul>
<li>That the contract in question be terminated; and</li>
<li>That the Second Defendant take delivery of the 5 airlock units that the  Claimant had supplied under the terminated contract, and to pay their value (AED  21,614.28) to the Claimant.</li>
</ul>
<p>Subsequently, the Claimant and the second Defendant appealed.</p>
<p><strong>The Court Of Appeal<br /><br /></strong>The Court of Appeal dismissed the  Claimant&rsquo;s appeal. However, with respect to the Second Defendant&rsquo;s appeal, the  court decided to overturn the decision of the Court of First Instance and  dismissed the case. Consequently, the Claimant appealed to the Court of  Cassation.</p>
<p><strong>The Court of Cassation<br /><br /></strong>Before the Court of Cassation,  the Claimant argued that the Court of Appeal had erred in its decision to  dismiss its case. The basis of the Claimant&rsquo;s argument was that an event of  force majeure had occurred. The Claimant submitted that the Department of Civil  Aviation had struck the Claimant off its list of accredited suppliers, and had  refused to accept any of the Claimant&rsquo;s work or use its equipment in the Dubai  Flower City project. The Claimant submitted that this was an event of force  majeure which had rendered the performance of its obligations under the contract  impossible.&nbsp; On the Claimant&rsquo;s assessment, this impossibility equated to the  contract being terminated. The above interpretation by the court means that the  Claimant cannot request the 2nd Defendant to take delivery of the 5 airlock  units that the Claimant had supplied under the terminated contract and to pay  their value (AED 21,614.28) to the Claimant.<br /><br />The Court of Cassation  accepted the appeal on the following basis:</p>
<ul>
<li>It is a settled principle that with respect to a binding contract, each  party must perform that which he is obliged to do, failing which the other party  may request that the contract be terminated in compliance with Articles 272 and  273 of the Civil Code. It is also settled that if the contract is terminated,  the parties shall be returned to their pre-contractual positions and, if that is  not possible, the court will award damages (but in this case only on the  condition the Claimant submitted evidence of the force majeure event). The Court  decided, however, that an extraneous cause such as an unforeseen occurrence,  event of force majeure, fault of the aggrieved party or acts of a third party  may be pleaded as a defence to liability in tort or in contract if it is  unanticipated and impossible to resist, avoid or guard against.</li>
<li>It is a further settled principle that the determination of whether an  alleged extraneous cause would enable a party to avoid liability lies within the  sole discretion of the Court. The fact that the Department of Civil Aviation had  struck the Claimant off its list of accredited suppliers and refused to accept  any of its work or use its equipment in the project would not in itself  constitute an extraneous cause that would make the supply contract between the  Claimant and the Defendants impossible to perform. The Court determined that  such a situation could be classified as a normal commercial risk, which was  capable of being anticipated and thus avoided. The Court decided that this  commercial risk was something a prudent person would be able to guard against.  According to the Court of Cassation it was possible for the 2nd Defendant to  consult/review the list of the accredited suppliers of the Department of Civil  Aviation.</li>
</ul>
<p>In light of this the Court of Cassation overturned the lower&rsquo;s court decision  as it considered that the fact the Claimant was struck off from the list of  accredited suppliers of the Department of Civil Aviation was not to be  considered as an event of force majeure requiring the termination of the  contract.</p>