The Civil Transactions Law and the contracts you already have

The Council of Ministers approved the Civil Transactions Law by Resolution No. 820 dated 24/11/1444H,1 and it was issued by Royal Decree No. M/191 dated 18 June 2023.2 For the first time, the general rules of contract and obligations in the Kingdom are set out in a single codified text.

Two provisions every contract manager should know

• Good faith. “A contract shall be implemented as per its provisions and in a manner consistent with good faith practices” (Article 95).2
• Exceptional circumstances. Where extraordinary, unforeseeable events make performance excessively onerous so as to threaten heavy loss, the debtor may, without undue delay, invite the other party to negotiate (Article 97).2

It reaches existing contracts

The resolution approving the law provides for its application to facts that arose before it came into force, subject to stated exceptions.1 Contracts signed before the law therefore cannot simply be assumed to sit outside it.

What to do

1. Identify long-term contracts that are most exposed to changes in cost or circumstances.
2. Review how their change, force-majeure and termination clauses interact with the hardship provision.
3. Keep a record of events and of notices sent “without undue delay”.
4. Draft new contracts to say clearly how exceptional events will be handled.

This note is general information, not legal advice. Check the text in force with the competent authority before acting.