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Qatar – Gulf Crisis : Contracts

Breach or not to breach that is the question: Contractual Obligations and damages in site of breach?

According to the Qatari Civil Code, contractual obligations must be kept. A contract may be revoked or altered only by mutual consent of the parties or for reasons provided for by law. In addition, the law stipulates that if a contracting party breached a contractual obligation and such breach caused damages to the other party, the latter is entitled under, by virtue of the Qatari Civil Code to be indemnified. The parties may have agreed on a certain amount to indemnify damages arising from contractual breach. If not, the courts of Qatar shall calculate the indemnity unless such calculation is provided in by the law. During such calculation, Indemnities shall cover damages and the loss of profit, provided that such damages or loss of profit are a natural consequence of the failure or delay to performing the contractual obligation.

However, the civil code stipulated that damages shall not be consequential by its nature if the contracting party was able to avoid damages by performing reasonable measures. In the current events in Qatar, we believe that there are no reasonable measures to be performed for the avoidance of damages resulting from such events. The law, also, provided that a contracting party who is not in breach of its contractual obligation due to fraud or gross misconduct, shall indemnify the other party only for damages that can be foreseen at the time of executing the contract. In our opinion, the current catastrophic events could have never been foreseen. Accordingly, we believe no a contract party shall not be held in breach of its obligation due to the current events and shall not be compelled to indemnify the other party for any damages arising as a result of such events unless the parties agreed on the possibility of indemnification even in case of such events.

 

Do you consider damages arising from this situation Force Majeure? If not who is to blame?

The answer to this question depends on the effects of the current events on the obligations of the contracting parties. If the effect is the impossibility of performing an obligation, then such events shall be considered as force majeure. According to the Qatari law, Force majeure discharges the contracting party of indemnities unless the parties agreed otherwise.

On the other hand, if the effect of such events renders the contractual obligation excessively onerous that threatens obligor with exorbitant loss, then such events shall be considered as exceptional and unforeseeable events. In this case, the Qatari Civil Code provides that the judge may, according to the circumstances and after taking the interests of both parties into consideration, reduce the excessive obligation to a reasonable level.