Exceptional Circumstances in Bahrain: When Contractual Performance Becomes Excessively Burdensome but Not Impossible

Hardship Under Bahraini Law: Distinguishing Exceptional Circumstances from Force Majeure

Recent regional developments, economic volatility, and disruptions affecting supply chains and commercial operations continue to raise important questions for businesses operating in Bahrain.

Many companies have already considered whether such developments may trigger force majeure protections under their contracts and/or under Bahraini law. Under Bahraini law, the doctrine of force majeure generally applies where an exceptional and unforeseeable external event renders the performance of contractual obligations impossible.

A practical question frequently arises, however: what happens when performance is not impossible, but has become significantly more difficult or commercially burdensome?

In such circumstances, Bahraini law may provide relief through the doctrine of Exceptional or Unforeseen Circumstances, commonly referred to as the doctrine of hardship.

Exceptional Circumstances Under Bahraini Law

While force majeure applies where an external and unforeseeable event makes performance impossible, Bahraini civil law also recognises situations where performance remains possible but becomes excessively onerous due to exceptional circumstances that could not reasonably have been anticipated when the contract was concluded.

In these cases, the doctrine of Exceptional Circumstances may apply. Rather than terminating the contract, the doctrine seeks to restore the contractual balance where unforeseen events fundamentally alter the economic equilibrium of the agreement and expose one party to disproportionate hardship.

Where the legal threshold is met, Bahraini courts may intervene to adjust the parties’ obligations to a reasonable level, including by modifying contractual obligations or financial terms in order to mitigate excessive loss while preserving the contractual relationship.

Practical Considerations for Businesses

Businesses operating in Bahrain should carefully assess how unforeseen events may affect their contractual obligations. In particular, they should consider the following:

• Evaluate whether unforeseen events have significantly altered the economic balance of the contract, rendering performance excessively burdensome, even though it remains technically possible.
• Review key contracts to identify force majeure provisions, hardship clauses, notice requirements, and renegotiation mechanisms, and assess how these may interact with the protections available under the applicable laws.
• Where hardship is anticipated, early engagement with contractual partners may allow for commercial renegotiation or temporary adjustments, potentially avoiding disputes or the need for judicial intervention.

How We Can Help

Our Dispute Resolution team can assist businesses in navigating contractual challenges arising from unforeseen events, including:

1. Reviewing commercial contracts for risk allocation and hardship provisions.
2. Assessing whether force majeure or exceptional circumstances may apply.
3. Advising on contract renegotiation strategies.
4. Representing clients in disputes arising from non-performance, delays, or contractual hardship.

Further Information

For further information or assistance, or to discuss how these issues may affect your business, please contact the key contacts.