Hardship and Lump-Sum Price Adjustments under the New UAE Civil Code: Articles 224 and 829
min readHow Will the UAE's New Civil Code Impact Lump-Sum Construction Contracts?
Lump-sum pricing has long been the dominant contractual model for major construction projects in the UAE. Such contracts are valued by employers for price certainty and accepted by contractors as a necessary feature of a competitive market. Under Federal Law No. 5 of 1985 ("1985 Civil Code"), that certainty has been limited only by the hardship doctrine in Article 249, permitting narrow judicial intervention.
On 1 June 2026, Federal Decree-Law No. 25 of 2025 ("New Civil Code") will take effect, replacing the 1985 Civil Code in its entirety. It materially expands hardship relief through a two-tier framework: Article 224 (a general hardship provision for all contracts) and Article 829 (a new muqawala[i]-specific provision). Together, these expressly empower dispute resolution forums to adjust remuneration, extend completion periods, or terminate contracts to achieve fairness — provisions particularly apt given the regional conflict that broke out mere months after the New Civil Code's enactment in December 2025.
Hardship and Lump-Sum Pricing under the 1985 UAE Civil Code: Articles 249 and 887(1)
The current framework rests on two key provisions. Article 887 (1) provides that where a contract is concluded on a lump-sum basis according to an agreed plan, the contractor has no claim to an increase in price.
Article 249 provides the only statutory avenue for relief, permitting the judge to reduce the obligation to reasonable limits in exceptional circumstances. Any agreement to the contrary is void — Article 249 is mandatory, reflecting the principle that contractual equilibrium is a matter of public order (nitham al-'am). However, its application has rightly been constrained by the judiciary, by setting a demanding threshold that must be met before a judge may exercise such discretion. Notably, Article 249 only empowers the judge to reduce the obligation — it does not expressly authorise time extensions, increased remuneration, or termination, and the scope of such discretion is limited.
As discussed in our earlier article, "The balance between Fairness and Certainty in UAE Construction Contracts", the interplay between Article 249 and other general provisions — including Article 106 (abuse of right) and Article 246 (1) (good faith) — has afforded judges and arbitrators wide discretion, creating uncertainty for both parties.
Articles 224 and 829 of the New UAE Civil Code: A Two-Tier Hardship Framework for Construction Contracts
The New Civil Code establishes a two-tier hardship framework. Article 224 replaces Article 249 as the general provision for all contracts, retaining the same threshold conditions but adding an express power of rescission — a remedy not previously available under Article 249.
Article 829 then introduces, for the first time, a muqawala-specific hardship provision empowering the dispute resolution forum to extend the completion period, increase or decrease remuneration, or terminate the contract to restore contractual balance.
Taken together, contractors on lump-sum contracts who previously had no claim to increased remuneration under Article 887(1) now have a statutory basis to seek adjustment, and both provisions offer termination as a new exit mechanism where disruption is so severe that neither time nor money can restore fairness.
What Are the Threshold Conditions, and Can Article 829 Be Excluded?
The threshold remains high: circumstances must be exceptional, of a general character, unforeseeable at the time of contracting, and must substantially upset the contractual balance. From case law on Article 249, qualifying events include war, sudden strikes, official price-fixing measures, and epidemics. Routine cost fluctuations or risks a prudent contractor should have anticipated are unlikely to qualify.
A critical drafting question is whether Article 829 can be contractually excluded. Article 829 lacks the explicit mandatory language found in Article 249 ("any agreement to the contrary is void"), and the muqawala provisions are generally understood to be non-mandatory default rules.
However, the fact remains that even if Article 829 were excludable, Article 224 (as the successor to Article 249) remains mandatory, meaning general hardship relief would remain available — albeit without the muqawala-specific remedies of time extensions and remuneration adjustments. The precise interaction between Articles 249 and 829 will be a matter for judicial interpretation.
How Do Articles 224 and 829 Interact with FIDIC Contracts Governed by UAE Law?
FIDIC does not contain a general hardship or imprévision clause permitting price adjustment for unforeseen economic changes. In particular, the FIDIC Yellow Book (1999 edition) allocates cost escalation risk to the contractor under lump-sum pricing, whilst the Red Book (1999 edition) — although when unamended is a re-measurable form — similarly contains no general hardship mechanism permitting price adjustment for unforeseen economic changes, with claims and variations governed by Sub-Clause 13 (Variations and Adjustments) and Sub-Clause 20.1 (Contractor's Claims).
While Sub-Clause 13.8 provides an optional mechanism for cost adjustment through formulae linked to published indices, this clause is frequently deleted or left inactive in Middle Eastern FIDIC-based contracts, leaving contractors without a contractual route to price relief for general market increases.
Articles 224 and 829 therefore have the potential to operate as a statutory overlay on FIDIC contracts governed by UAE law, enabling contractors to seek adjustments beyond those available under the contractual regime. This creates a tension between the contractual risk allocation and the statutory power of the dispute resolution forum to intervene. As such, this is something employers need to consider when contracting and where possible, look to clarify and address in their particular conditions.
Geopolitical Disruption in the Middle East: How the Regional Conflict Engages UAE Hardship Provisions
The regional conflict has caused travel restrictions, workforce shortages, supply chain pressures, shipping delays, and escalating material costs — precisely the types of exceptional circumstances the new framework is designed to address.
The escalation around the Strait of Hormuz has increased logistics risk and war-risk insurance costs, whilst the temporary halt at Qatar's Ras Laffan LNG hub has tightened energy markets. The producer price indexes for aluminium mill shapes and steel mill products jumped by 39.1% and 20.9% respectively year-on-year through February 2026, with construction input prices rising at an annualised rate of 12.6% during the first two months of 2026[ii].
These are the types of systemic, market-wide cost increases that engage the "exceptional" and "general character" thresholds of the hardship doctrine. Articles 224 and 829 may provide a more effective pathway to relief than Article 249, though parties should be mindful that the date of the contract, the conflict's duration, and the evolving foreseeability of its effects will be relevant.
Which UAE Civil Code Applies to Construction Contracts Entered into Before 1 June 2026?
Article 4(1) of the New Civil Code provides that it shall not apply to facts and transactions preceding its coming into force. However, for contracts spanning the transition date — as many construction contracts will — transitional issues are expected to arise.
The critical question is going to be whether a hardship claim arising after 1 June 2026 on a pre-existing contract will be governed by Article 249 or the expanded framework of Articles 224 and 829.
It is believed that notwithstanding the fact that a contract may have been executed before 1 June 2026, disputes arising after implementation will generally fall under the new framework. Whilst parties to contracts straddling the transition date could look to express which civil code provisions govern their rights and obligations, the mandatory aspect of such provisions (particularly Article 224) adds a complexity as to whether or not the clause could be effective.
Practical Implications for Contractors, Employers, and Legal Advisers
For contractors, the two-tier framework provides a strengthened statutory basis for relief, but the threshold remains high and detailed contemporaneous records will be essential. For employers, lump-sum price certainty is now subject to both a likely mandatory general hardship doctrine (Article 224) and a muqawala-specific intervention power (Article 829).
Key questions for all parties include:
- whether Article 829 is mandatory or excludable;
- how the threshold conditions will be interpreted;
- how the provisions interact with FIDIC claims and variation mechanisms; and
- whether bespoke hardship clauses should be incorporated?
Conclusion: Preparing for the New UAE Civil Code's Hardship Regime Before 1 June 2026
The two-tier hardship framework under the New Civil Code is a significant development in UAE construction law, materially expanding upon the limited relief under Article 249. The imperative for all stakeholders is clear:
- review existing contract templates,
- understand the new statutory backdrop, and
- ensure that risk allocation provisions are fit for purpose before 1 June 2026.
This article is for general information only and does not constitute legal advice. Independent legal advice should be sought in relation to any specific matter.
You can read more about the New UAE Civil Code: Notice Obligations and Contractual Time Bars under the New UAE Civil Code: Article 816(3).
[i] A ‘muqawala’ is generally defined as a contract for works or services (eg. a construction contract);
[ii] Producer price index data from the U.S. Bureau of Labor Statistics (released 18 March 2026).
