The doctrine of impossibility of performance occupies a distinctive position under Saudi Law. Codified under Article 110 of the Civil Transactions Law (the “CTL”), the doctrine provides that where performance of an obligation becomes impossible for a reason beyond a party’s control, the obligation shall stand extinguished by operation of law.
On its face, Article 110 appears to sit comfortably alongside the comparable common law doctrine of frustration as well as comparative provisions found in the civil codes of Saudi’s GCC neighbours. This post argues, however, that Article 110 is properly understood as sui generis: a doctrine that shares structural features with each of these comparators, yet cannot be fully assimilated into either.
Prior to carrying out a comparative analysis of Article 110 of the CTL and the doctrine of impossibility codified therein, it is necessary to examine the statutory framework within which it is found. The said Article 110, appearing under the heading, “Impossibility of Performance” reads as follows:
1. If the performance of an obligation in a bilateral contract becomes impossible for a reason beyond the debtor’s control, said obligation and the corresponding obligation shall be extinguished, and the contract shall be automatically terminated.
If only part of the obligation is impossible to perform, the obligation shall be extinguished only for such part and its corresponding obligation. Such provision shall apply to temporary impossibilities in time-based contracts.
Thus, on a reading of the above, three ingredients for invoking Article 110 emerge:
1. Performance must be objectively impossible — not merely more onerous, costly, or difficult, a threshold that separates Article 110 from the hardship mechanism provided under Article 97 of the CTL.
2. The impossibility must arise from a cause beyond the debtor’s control. Nothing in the text requires that cause to bear any particular character.
3. The consequence is automatic. Both the affected obligation and its corresponding obligation are extinguished by operation of law, subject only to Article 110 (2)’s carve-out for partial extinguishment in cases where the contract is severable.
It is against the above ingredients found under Article 110 of the CTL that the doctrine of impossibility of performance under Saudi law shall be analysed and compared with the common law and impossibility provisions found under the civil codes of other GCC countries.
Similar to Saudi law, the common law doctrine of frustration recognizes that where a supervening event occurs, which is not attributable to the fault of either party, it will automatically discharge both parties from the performance of their obligations by operation of law. This was established in the landmark judgment of Taylor v Caldwell, prior to which English law insisted on performance of contractual obligations regardless of whether such an event occurred.
In a further similarity to Saudi law, given the doctrine’s all-or-nothing approach, it is applied within strict confines. The House of Lords in Tsakiroglou & Co Ltd v Noblee Thorl, held that despite the closure of the customary route through the Suez Canal — because of which the freight journey for a sale contract for groundnuts became considerably longer — the contract did not stand frustrated. Applying the test of whether performance had become a thing radically different from that which was undertaken by the contract, the House of Lords held that while performance was more onerous due to a rise in freight cost, it was not rendered radically different or impossible. This very same approach is reflected in the CTL, where Article 97 provides that if the performance of a contractual obligation is rendered excessively onerous due to extraordinary and unforeseeable events, it may only be rebalanced but not extinguished as in the case of Article 110.
However, in the application of the doctrine of frustration, a relevant enquiry that the English courts make is whether the supervening event was foreseeable. In Canary Wharf Finance v European Medicines Agency, it was held that if the supervening event is foreseeable, the court will assume that the parties would have “framed their agreement taking this factor into account”. In stark contrast, Article 110 of the CTL makes no reference to the concept of foreseeability. A party relying on Article 110 need not demonstrate that the reason why performance of its contractual obligation became impossible was itself unforeseeable at the time of contracting.
The above divergence on foreseeability is instructive. While the common law doctrine of frustration asks what the parties ought to have anticipated, Article 110 asks only whether performance has, in fact, become impossible.
Having considered the position under the common law, it is instructive to turn to Saudi Arabia’s regional counterparts, the United Arab Emirates (UAE) and Qatar, whose civil codes are often assumed to mirror the CTL, given their shared civil law heritage and grounding in Sharia principles.
However, an examination of the relevant provisions of the UAE and Qatar civil codes reveals that both laws take a markedly different approach to impossibility of performance as compared to the applicable Saudi law. The relevant provisions are reproduced for reference:
“In contracts binding on both parties, where performance of an obligation by one party is extinguished by reason of impossibility of performance due to force majeure beyond the control of the obligor, such obligation and correlative obligations shall also be extinguished and the contract deemed rescinded ipso facto.”
“In contracts binding on both parties, if force majeure supervenes which makes the performance of the obligation impossible, the corresponding obligation shall cease, and the contract shall be automatically cancelled.”
Therefore, the approach to the doctrine of impossibility under both the Qatar and UAE civil codes is such that the supervening event due to which a party is unable to perform its obligations under the contract must be for reason of force majeure, i.e., events that are outside the reasonable contemplation of the parties.
By contrast, the CTL does not predicate the invocation of Article 110 of the CTL on the occurrence of a force majeure event. Instead, under Article 125 of the CTL, force majeure is treated as a distinct concept with no correlation with impossibility of performance.
The foregoing comparative analysis reveals that Article 110 of the CTL cannot be neatly assimilated into either the common law or the civil codes of Saudi Arabia’s GCC neighbours, and is, in this sense, sui generis.
Structurally, Article 110 is closer to English law rather than the UAE and Qatar civil codes. Similar to the common law doctrine of frustration, impossibility of performance under the CTL is not premised on the occurrence of a force majeure event, whereas the UAW and Qatari codes both treat this as a precondition.
However, the structural similarity with the common law doctrine of frustration cannot be overstated to extend to substance as well. Frustration remains conditioned on the foreseeability of the supervening event. Article 110 imposes no such condition. A party needs to only establish that performance has, in fact, become impossible for a reason outside of its control — irrespective of whether it was foreseeable or not.
