Iran War Force Majeure Claims Cannot Mask Pre-Existing Breaches Lawyer Warns

Industry News

Shipping dock

As the 2026 Iran War disrupts shipping lanes, airspace, and cross-border logistics across the Gulf, contractors and developers are facing a surge of force majeure claims from suppliers unable—or unwilling—to perform. But a recent UAE court ruling is sending a clear message to the market: war does not excuse a supplier’s earlier failure.

Mahmoud Abuwasel, Partner at Wasel and Wasel

Partner at Wasel and Wasel, Mahmoud Abuwasel who specialises in Tier 1 services explains that a landmark decision by the Dubai Court of First Instance Judgment No. 695/2023 is now emerging as a critical reference point for disputes across the Gulf Cooperation Council’s (GCC) construction, engineering, and infrastructure sectors.

The judgment establishes a decisive principle for wartime contracting: force majeure cannot cure a pre-existing breach, and an armed conflict cannot be weaponized to camouflage manufacturing defects.

Precedent During Conflict

The precedent case arose from a multimillion-dollar supply agreement tied to a water infrastructure project in Sudan. A contractor had engaged a supplier to manufacture and deliver large-scale steel water tanks and supporting structures, supported by a substantial advance payment and secured by bank guarantees.

Following standard GCC construction logistics protocols, the contractor made a 30% advance payment of $1,277,832 on January 8, 2023. In return, the supplier was to provide unconditional bank guarantees for the advance payment, alongside a 10% performance bond valued at $425,944. The contract rigorously stipulated that the materials could not be shipped until they passed an independent third-party inspection and received a formal “Shipping Release Note” directly from the end-client (the Ministry of Irrigation and Water Resources in the Republic of Sudan).

Before shipment, the materials underwent independent inspection. The results were unequivocal: the goods failed to meet contractual specifications. Structural components were undersized, safety features were non-compliant, and critical engineering standards were breached. The end client formally rejected the materials.

Just days later, the Sudanese Civil War erupted, shutting down airspace and halting travel. The supplier argued that the conflict made it impossible to send engineers to rectify the defects or complete delivery, and invoked force majeure to justify terminating the contract, while still retaining the advance payment.

The Court’s Key Finding

The Dubai Court rejected that argument in full.

In a detailed judgment, the Court drew a clear distinction between the cause of non-performance and the timing of breach. It held that the supplier’s failure had already crystallized before the outbreak of war—when the materials failed inspection and were rejected by the client.

The subsequent conflict, while severe, was legally irrelevant to that earlier failure.

The Court concluded that:

The supplier was in material breach prior to the war
The war did not cause the breach
Force majeure could not be invoked to escape liability

The contract was rescinded, and the supplier was ordered to refund the full advance payment, with interest.

Implications for Iran War 2026

The parallels with the current Middle East situation are striking.

Across the GCC, major construction projects—from infrastructure programs to energy developments—depend on tightly coordinated international supply chains. In recent weeks, military restrictions in key maritime corridors and widespread airspace closures have disrupted those flows, triggering a wave of force majeure notices.

While some claims are legitimate—particularly where compliant goods are stranded in transit—others raise more complex issues. In many cases, suppliers were already facing delays, quality failures, or missed milestones before the conflict escalated.

The Dubai ruling provides a clear legal framework for distinguishing between the two scenarios.

If a supplier’s breach occurred before the onset of war, the risk remains with the supplier.

The later emergence of a force majeure event does not retroactively excuse defective performance.

The End of ‘Fix-It On-Site’

One of the most significant practical consequences of the ruling is its impact on the industry’s long-standing ‘fix-it-on-site’ practice, informal understandings to fix supplied goods’ defects on site.

In normal conditions, purchasing contractors may agree that suppliers ship partially non-conforming goods, with the understanding that imperfections will be corrected during installation on site. That approach relies heavily on the mobility of technical teams to attend sites and the flexibility of project timelines.

In a conflict environment, those assumptions collapse. Travel restrictions, visa suspensions, and site access limitations make post-delivery rectification impossible.

The Court’s reasoning makes clear that such informal arrangements carry significant legal risk. A supplier cannot rely on the possibility of future correction—especially where the goods failed formal inspection before dispatch.

Bank Guarantee Lessons

The judgment also highlights critical financial considerations for contractors.

Although the advance payment in the case was ultimately recovered through litigation, the Court noted complications arising from how the payment was made. Because funds were paid into an alternative account at the request of the supplier, and not transferred strictly in accordance with the bank guarantee conditions in the contract, the guarantees themselves could not be immediately invoked. This forced the contractor into a longer recovery process through the courts.

For companies operating in the current environment, the message is clear:

Ensure strict compliance with guarantee terms when making advance payments
Do not assume that security instruments will automatically apply in a dispute
Act quickly to document and notify contract breaches as they arise

Sole and Direct Cause

While the decision was issued in Dubai, its underlying principles are consistent across GCC jurisdictions. Civil law systems in the region—including those of Saudi Arabia, Qatar, and Oman—generally require that force majeure be the sole and direct cause of non-performance.

Where a breach predates the force majeure event, that causal link is broken.

As a result, courts across the region are likely to adopt a similar approach when confronted with disputes arising from the 2026 conflict.

Looking Ahead

As the Middle East situation continues to evolve, construction stakeholders face mounting pressure to manage risk, preserve cash flow, and maintain project continuity.

The Dubai Court’s ruling provides a critical anchor in an otherwise uncertain landscape. Its message is direct and uncompromising:

War may prevent performance—but it does not rewrite contractual history.

For contractors and project owners, the priority is clear: focus on documented performance, enforce compliance at the factory level, and act decisively when breaches occur. In a volatile environment, the strongest protection lies not in reacting to disruption—but in proving where the failure began.

Mahmoud Abuwasel, Partner at Wasel and Wasel has written a more detailed discussion of the implication for contractors during the 2026 conflict in the Middle East. He can be emailed at mabuwasel@waselandwasel.com.