Saudi Civil Transactions Law: Five Changes Every Business Should Know

Since December 2023, Saudi civil obligations are codified for the first time. Here is what changed.

A codified civil law

The Civil Transactions Law, issued by Royal Decree No. M/191 of 1444H, entered into force on 16 December 2023. For the first time, the rules on contracts, obligations, liability and ownership are set out in one written code, giving courts and parties far more predictability.

Five changes that matter

1. Clear contract rules: offer and acceptance, defects of consent and the effects of contracts are written down.
2. Compensation for moral harm: damage to reputation, feelings or dignity can be compensated.
3. Limitation periods: most claims cannot be heard after ten years, with shorter periods for certain periodic and specific rights.
4. Exceptional circumstances: where unforeseeable general events make performance excessively onerous, the court may restore balance.
5. Liquidated damages: agreed compensation can be reduced if it is excessive, or increased in cases of fraud or gross negligence.

What to do now

• Review standard contracts for limitation, penalty and force-majeure clauses.
• Update templates signed before the law came into force when they are renewed.

Ask LexArab

Upload a contract and LexArab will review it against the Civil Transactions Law. General information, not legal advice.